Citadel Securities LLC, joined by three other investment firms, sued Chicago Board Options Exchange LLC and four more exchanges over claims they systematically overcharged or wrongly assessed fees on trades.
Also named as defendants in a state court complaint filed today in Chicago are the International Securities Exchange LLC, the NYSE Euronext-owned NYSE Arca electronic options exchange and NYSE Amex exchange and Philadelphia Stock Exchange operated by the NASDAQ OMX Group. (NDAQ)
“There is no dispute that the exchanges improperly charged fees to the market makers on millions of orders over an approximately 7-year period,” according to the complaint. “The dispute arises from the exchanges assertion that they are entitled to mischarge their members without taking any responsibility for it and without any liability under the law.”
The investment firms said the overcharges partly stem from the exchanges wrongly assessing market maker-to-market maker orders with “payment for order flow” fees.
Gail Osten, a spokeswoman for the Chicago Board Options Exchange, didn’t immediately reply to a voice-mail message seeking comment on the complaint.
Molly McGregor, a spokeswoman for ISE, also didn’t immediately reply to a voice-mail message seeking comment.
Joining Citadel in the case are Chicago-based Ronin Capital LLC, San Francisco-based Group One Trading LP and Susquehanna Investment Group.
The charges were assessed between January 2004 and June 2011, according to their complaint. One firm, identified in the court document only as the “subject firm” paid the defendant exchanges nearly $6.4 million during that time for mis-marked orders.
The market-maker plaintiffs said they seek “recovery or restitution of all PFOF fees that were inappropriately charged by the exchanges.”
The case is Citadel Securities LLC v. Chicago Board Options Exchange Inc., 13CH13246, Cook County Circuit Court, Chancery Division (Chicago).
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