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Market Structure & High Frequency Trading Issues

The complex interplay of an enormous number of trades happening in a short period of time between numerous market participants spread across disparate trading venues presents challenges for investigation and analysis. Economists at The Brattle Group have experience in investigations, litigation, and enforcement actions involving the analysis of the effects of market microstructure on market performance. Our experts also have experience working with “big data,” and our terabyte-scale data storage solutions provide for massive parallel processing, which may be required for the effective analysis of high-frequency trading activity.

We maintain affiliations with some of the leading academics and experts on the issues of trade execution, and the causes of flash crashes in high-frequency markets, including the Chair of the Financial Regulatory Authority Economic Advisory Committee, a Nobel Prize winning economist, and former chief economists at the U.S. Securities and Exchange Commission.

Engagements
REPRESENTATIVE ENGAGEMENTS

Below is a list of representative engagements for our Market Structure & High Frequency Trading Issues practice.

Claims arising from alleged collusion in the manipulation of EURIBOR
Brattle is providing economic analysis and expert witness testimony to a global investment bank and their legal counsel in their defense of claims to nullify EURIBOR-linked interest-rate swaps (IRS) entered into by the claimants. The assertion is that the IRS lacks randomness due to the European Commission finding that the investment bank participated in a cartel to manipulate the EURIBOR benchmark. Brattle has carried out analysis of EURIBOR submissions and macroeconomic evidence to assess whether the movements in EURIBOR over the relevant period were attributable to alleged coordination between EURIBOR panel banks or, alternatively, whether they were attributable to macroeconomic developments since the 2008-09 financial crisis. Brattle has also analyzed claimants’ investments and commercial incentives for nullifying the IRS. Brattle analysis and testimony will be submitted to the Spanish Court of First Instance.
EC investigation of alleged collusion in the market for FX trading
Since 2015, we have advised a global investment bank in connection with the European Commission (EC) investigation of alleged collusion and manipulation of benchmarks in the global markets for foreign exchange (FX) trading. Our analysis has entailed reviewing trader chat data, with the view to identifying anticompetitive information exchange and conduct as distinguished from market making activity. We have also analyzed forex volumes traded between counterparties across different platforms and in different currency pairs during 2008-2012, to estimate bid-ask spreads and revenues associated with FX trading activity. Our analyses have been submitted to competition authorities involved in the global investigation, including the European Commission and the Swiss Competition Authority. Brattle has also been retained to defend class action damages claims brought against the investment bank in the UK and other EU courts.
EC investigation of alleged collusion in the global market for trading credit default swaps
Brattle was retained by a global investment bank in connection with the European Commission (EC) investigation of alleged collusion and exclusionary conduct by 14 investment banks in the global market for trading credit default swaps (CDS). Our tasks involved analyzing the liquidity of CDS index trading during 2006-2009 to determine if the market was sufficiently liquid to move from over-the-counter to exchange based trading. We also evaluated the allegation that the investment banks excluded exchanges from setting up exchange trading of CDS products. To this end we assessed the exchanges’ preparedness to conduct CDS trading. This involved reviewing the evidence on financial and other derivatives launched by exchanges to determine the factors required to ensure a successful outcome of a financial futures product. We submitted economic and financial analyses and reports to the EC, and provided written and oral testimony to the EC at case hearings.
Claim regarding manipulation of LIBOR in UK High Court
Brattle was retained by a global investment bank to provide economic analysis and expert witness testimony in defense of a claim brought in the UK High Court related to the alleged manipulation of GBP LIBOR. Brattle examined the LIBOR submission process to evaluate the statistical probability of a panel bank manipulating LIBOR and estimated the effects of the financial crisis on the interbank lending market and the LIBOR submissions of panel banks. We analyzed differences in the USD and GBP interbank markets and the differing effects on USD and GBP LIBOR of macroeconomic developments and policy interventions during 2007-09. Our analysis was used to reach settlement with the claimant.
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