The 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, P.C., at 1-215-875-3062 or by e-mail at firstname.lastname@example.org.
A copy of the complaint can be viewed here.
A copy of the order granting lead counsel 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
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.