Nasdaq Sues Rival Exchange, Alleging Stolen Tech Secrets

Updated on
  • Miami International accused of violating seven Nasdaq patents
  • MIAX employs at least 15 former Nasdaq employees, suit says
Photographer: Victor J. Blue/Bloomberg

Nasdaq Inc. sued a rival exchange operator, accusing Miami International Holdings Inc. of infringing patents and stealing trade secrets with help from former Nasdaq employees.

Nasdaq claims Miami International copied its core trading technology. Miami International operates two options exchanges, MIAX Options and MIAX Pearl, that handle about 6 percent of the U.S. equity options market. Nasdaq says at least 15 of its former employees joined MIAX. Nasdaq alleges that three of them forwarded technical documents to their personal emails before leaving, while another employee improperly retained some.

Nasdaq, which has an almost two-fifths share of U.S. options trading, asked the court to stop MIAX from infringing seven patents and pay damages. The lawsuit isn’t requesting an order to shut MIAX, something plaintiffs can ask for in cases like this one. The alleged trade-secrets violations center on Nasdaq’s INET technology, which is the core software engine that powers Nasdaq’s exchanges. Nasdaq also licenses that technology to more than 100 exchanges around the world, according to the complaint.

MIAX spokeswoman Dominique Prunetti-Miller didn’t have an immediate comment. Nasdaq spokesman Allan Schoenberg declined to comment.

The MIAX website says its trading platform was “developed in-house.” Nasdaq disputed that assertion in its complaint, saying: “MIAX instead relied on or piggybacked off of the Nasdaq trade secrets and other technical know-how acquired by former Nasdaq employees during their tenure at Nasdaq.”

Princeton, New Jersey-based MIAX opened its first options exchange in 2012, and a second one earlier this year. “This calculated theft of the fruits of Nasdaq’s long-term investments and intellectual property allowed MIAX to launch both of its exchanges in record time -- at Nasdaq’s expense,” Nasdaq said in the lawsuit, filed Friday in Trenton federal court.

MIAX hired the Nasdaq employees “so that it could avoid incurring or reduce the risk, time, and expense of independently developing its own trading technology,” Nasdaq said in the lawsuit.

Nasdaq didn’t identify any of the employees by name. One of them is a senior technology executive at MIAX, according to the suit, where he “directs the development of MIAX’s trading system platforms and related production systems operations.” At Nasdaq, he “was the VP of Global Systems Development and was extensively involved in and knowledgeable about INET, and had access to Nasdaq trade secrets,” Nasdaq said.

At least five times between August 2010 and January 2011, that person “forwarded to his personal email technical documentation containing Nasdaq trade secrets, as well as other confidential Nasdaq documents including employee salary information,” according to the complaint.

The case is Nasdaq v. Miami International Holdings, 17-cv-6664, U.S. District Court, District of New Jersey (Trenton).

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