Cases & Investigations

Manipulative Options Trading Lawsuit

CASE STATUS: Pending
COURT: Eastern District of Pennsylvania
CLASS PERIOD START DATE: February 6, 2010

This lawsuit alleges widespread manipulation of call options on the Philadelphia exchange by market makers and brokers on dividend paying stocks and exchanged traded funds over several years.  A market maker is a broker-dealer, who enjoys certain margin and trading privileges because of their status, that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. It is alleged that the market makers used these privileges to unfairly manipulate certain options trades. The case is brought on behalf of writers of call options for dividend paying stocks and EFTs that were damaged by the scheme.

Persons who may have held short call positions or wish to discuss this action may contact Lawrence Deutsch, Esq. of Berger Montague, at 1-215-875-3062 or by e-mail at ldeutsch@bm.net.

A copy of the complaint can be viewed here.

A copy of the order granting lead counsel can be viewed here.

Background on Manipulative Options Trading Class Action

The Complaint alleges that beginning in February 2010, Market Maker Defendants manipulated call options in advance of dividend payments on underlying securities to the detriment of all other holders of short call positions in those options contracts.  Specifically, the Market Maker Defendants, with the acquiescence of Defendants NASDAQ/PHLX and NASDAQ OMX, manipulated the options contracts by executing among themselves huge pre-arranged matched options trades on underlying securities immediately prior to the date for that security’s dividend payment.

These market makers flooded the options market with additional option contracts one day before the ex-dividend date.  By greatly inflating the size of the open interest pool for the call options, the Market Maker Defendants, with the acquiescence of NASDAQ/PHLX and NASDQ OMX, increased their own chances of non-assignment of the options, thus increasing their chances to collect the dividend on those unassigned options.  Market Maker Defendants thereby improperly diverted the dividends that would have been paid to plaintiff and other members of the class, resulting in damages to the class.

Lead Attorneys

Lawrence Deutsch Headshot

Lawrence Deutsch

Shareholder

Request A Free Consultation

  • This field is for validation purposes and should be left unchanged.