Barry v. Cboe Global Markets, Inc.

Dist. Ct. did not err in dismissing for failure to state cause of action under either Securities Exchange Act or Commodities Exchange Act, alleging that defendant-Chicago Board Options Exchange traded options and futures based on VIX formula it developed under circumstances, where defendant should have known that third-party traders bought and sold options by taking advantage of VIX formula to affect VIX index and increase their profits at expense of honest traders. Plaintiffs were required to plead that defendant committed fraud, and plaintiffs’ allegations that defendant was negligent in designing VIX index and further failed to stop persons who took advantage of defendant’s formula was insufficient to plead action under Securities Exchange Act. Ct. of Appeals similarly found that plaintiffs could not proceed under Commodities Exchange Act, where plaintiff failed to plead that defendant acted in bad faith in failing to take action against third-party traders, especially where plaintiffs did not allege that defendant acted with knowledge of third-party trader manipulation.