Nasdaq Sues Rival Exchange, Alleging Stolen Tech Secrets

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.

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