This is Bloomberg Law with June Bresso from Bloomberg Radio. It's a battle over three hundred fifty micro seconds. You know, is there a point where speed is actually detrimental? Should we think about slowing things down? And you know, we introduced uh an amount of time that's absolutely uh so infantestimally small. It's irrelevant to the majority of traditional participants, but it's absolutely critical to certain people that have bought
advantages in the market. It may be infinitesimally small, as Brad katsu Yama, CEO of i X Group says, but the stock exchange operator made famous by flashboys, is in court defending those micro seconds. The electronic trading firms Citadel Securities is suing Securities and Exchange Commission to thwart the new order type known as D limit, which was approved
by the federal regulator last year. In arguments before the d C Circuit Court of Appeals, a lawyer for i e X, Katherine stetson the D limit helps blunt the edge of high frequency traders. What we are talking about is evidence of a huge amount of trading going on in the couple few micro seconds before a price changes. I just happened to blink my eyes. That blink is about two d times longer than the couple micro seconds that we're talking about. But the lawyer for Citadel, Jeffrey Wall,
criticized the D limit order. But this is just a sloppy order. It takes data, it misreads the stats, it assumes away all the costs. If you look at both the order and their brief to this court, it reads like it's all roses and no thorns. It doesn't have any consideration of the costs on retail or routing. My guest is an expert in securities law. James Cox, a
professor at Duke Law School. Jim explained the D limit or discretionary limit that was introduced by i X. It was part of their branding which when they came on the States initially and Michael Lewis wrote about them, and it was putting in a speed pump. You know. The individuals are in the bye side of the market have been yelling for some time that they are being disadvantaged in not just the price discovery process, but disadvantaged in getting a good price by all kinds of mechanisms like
co location et cetera. And what the exchanges did initially was instol of speed pump to take away the edge that the algorithmic electronic co located traders have been making a lot of money on. The great thing right now is that we have a chairman of the SEC joins the list of a lot of former very experienced, knowledgeable individuals for chairman of the SEC. But this chairman knows markets.
He came out of the market, didn't come out of the securities markets, but now the derivative markets, which are actually a better insight about how markets operator ought to operate, and these committed to the idea and bringing change to the markets. So the complaint is being made against the exchange about this speed pup is going to follow in death ears at the SEC and should in the courts as well. What's I x's argument before the circuit court.
This is a legitimate practice of saying, look, we have a market, here's our protocols. Nobody's going to get an advantage because their computers are located closer to the exchange. Everybody's going to be the same level playing field. And to the extent of that, the roads an advantage that some of these market participants have had will so be it. It's better to have individuals on the bi side finally hearing their voice is raised, and having an exchange where
they can go to. What I find interesting here is whether this changes things enough so that other exchanges will develop and find it to be competitive, that they're going to have to have a speed pup as well. Citadel Securities is suing the SEC. What's the cause of action? What are they allowed change? The alleging that the SEC is approving a practice that is, according to them, inherently
anti competitive. Is an artificial device that is going to slow down trading in price discovery, and therefore, the argument would be that you're disadvantaging the public interests because you're slowing down price movements, and what we should be doing is trying to facilitate beating up price movements. That's the argument. The attorney for Citadel says that the order type interferes with the natural course of the market. The display price
isn't real, it's phantom. How would you address that? I think it's hard to say that as dhantom because the orders are all coming in and what is actually happening is Citadel is wanting to start off three feet ahead in the race for the Finch line to determine what the price is going to be. So essentially what the Exchange is doing here is say starting line is the same for everybody, so it's putting everybody on the same plane.
Whereas as I read the argument, Citadel says, no, now we're ahead of the starting line and we want to preserve that position, and by doing that we can get to the price first. It's not clear to me that the price is going to be any different if everybody starts off the same point. Then it is presently with Citadelle starting off earlier, and so we're still going to have the same sort of pricing that goes on. It's
just a question about who gets that price first. And so the current arrangements where you have co locations and other devices that Citadel and a few other market traders use give themselves a competitive advantage over others, and they want to preserve the competitive advance. The Exchange is proposal.
The one that's being challenged is the Exchange is saying, no, we want to get everybody a chance to get the price, and by doing that, if you make the market pure fairer, we more individuals wanting to get that price, and we'll have a deeper market and better price discovery. So the lawyer four I X said that high frequency traders profit by exploiting the micro second differences. Others are in the middle of a speed war. They never signed up to fight.
Do you think that's a good description of what's happening. I think that's exactly right. I mean, all this happening is Toudadelle and lawyers have been able to put the odor of money in the air so that they can gain an advantage that others who weren't willing to pay for co location or some other devices that give them a competitive advantage. Not a question of somebody is saying, well, you know, we're the first ones to lay the cable across the Atlantic, so we should be able to charge
a fee for everybody's going to use it. Everybody's just using the same cable. But what's happening is that the exchanges for a payment of money by citadel and others have allowed the Citadels of the world to have a special entrance into their trading floor that gives them a
competitive advantage. And the result of that means that price that's going to be out there for a nano second is always going to be gobbled by the people who paid for that competitive advantage, and the various other traders who don't pay for that advantage are always going to be disfavored. I X is actually created on the whole idea that everybody's in the same line and they start off at the same place. Tell me what you think of this assertion that Judge Justin Walker made to Citadel's lawyer.
It's you who is going to a federal agency and saying stop a private entity I e X from doing what they want to do. You're the one who's trying to kind of regulate your way into a market victory. You know. The challenge to the faces is that they are challenging a development that is very arcay market structure. There's no crisp guidelines as to what the law expects
with respect to how markets are to operate. Therefore, you start off the idea that it's a natural situation for deferring to the expertise of the sec it's economists in evaluating how these markets are operating, and that strengthens, I think dramatically the case of the SEC sir saying look to deceive reasonable to us is with our mandate and the other thing that fits into this dynamics. I E X is not the only market. If buyers and sellers thought that what I X was doing was a bad idea,
then they can send their trade to someplace else. You know, there's numerous market centers where trades can be crossed. And what I feel is going on here with Citadel is they're fearful that if I expands this market here is going to be because of installing the speed up, and therefore other markets made do the same thing for realizing they have more trades as a result, making markets competitive,
and consequently that operates to the disadvantage of Citadel. So quite frankly, what's happening with X's development and the ANTEC going along with it, it dramatically challenges the business model that's made pretty much what Citadel is. So how do you think the d C circuit will rule here? I think I X is going to win this case. I think the SEC is going to win this case. I think within their power to think about what the microstructure
of the market is. There's a lot of intuitive appeal to thinking that everybody should be on the same plane the same starting line. I'd be very surprised cited otherwise. Do you think that SEC Chair Gary Ginsler is on a collision course with some of Wall Street's biggest names as he absolutely, absolutely, I gave him a lot of credit from I'm sure he's aware of that. But it's
not just the biggest Wall Street names. Those Wall Street names all have a name associated with them, and that is there on the dull side, and individuals, entities, pension funds, what have you. They're on the by side, and they've been the ones that have been disapenged for way too long through a series of market microstructure anomalies that favors the Citazaels of the world and doesn't do enough for the people who actually buy the stalks have to earn
a return for their beneficiaries. Thanks for being in the show, Jim. That's Professor James Cox of Duke Law School. The state of Oklahoma wants the Supreme Court to reverse its ruling in MC the Oklahoma, a ruling hailed by Indian tribes as a long overdue endorsement of their sovereignty in much
of the eastern part of the state. Joining me is Bloomberg Law reporter Jordan Ruben start by telling us about the ruling in mcg the Oklahoma So mcgurt was a criminal keys and they're the defendant who is a Native American. He said the state didn't have jurisdiction to charge him because he is an Indian and his crime took place on Indian land. That raised the question whether the land
was still a reservation. And so even though it was just a criminal case, that had all of these other implications generally for whether this reservation in mcgard's case, the Muskogee Creek Reservation still existed, and that had implications for whether all these so called five Tribes in eastern Oklahoma's reservations still existed. And the Supreme Court in a five four decision said that that land was still a reservation, that Congress never disestablished it, and so that land still
stands today as a reservation. Now it was a five to four decision. Tell us about the justices in the majority and the justice in descent. Sure, so in these five four cases, now six three cases, we typic he see these divisions along party lines in terms of the
presidents who appointed the justices. And that was almost exactly the case here we had Justice Neil Gorcich writing for the majority, joined by the rest of the Democratic appointees at the time, Ginsburg, Brier, Soudamior, and Kagan, and the dissent was written by Chief Justice Roberts joined by Justices Thomas Alito and Kavanaugh. Described the reaction to the decision from inside the state. So, starting from the perspective of the tribes, it's really difficult to overstate the importance of
this decision in their view. To take a step back, tribes really had not done well at the Supreme Court over the years, to say the least, and so they viewed this decision, even though it was just a criminal case involving that sort of discrete issue, as to the part of it which affirms the reservation, they viewed that as a long overdue affirmation of their tribal sovereignty and a decision that they wouldn't have expected, perhaps even before Gorst got on the court, and one that they perhaps
weren't even necessarily expecting then. And so it was widely celebrated there from the tribe's perspective, and it was really the opposite reaction from the state government's perspective. Ahead of the ruling. They had warned of all of these negative consequences if the state lacked jurisdiction in terms of criminals running loose on the street and that sort of thing. And the state's reaction after the ruling was, Hey, this is happening now, and the state is essentially telling the court, now,
we told you so. So the status said that this creates a public safety nightmare for victims and law enforcement. It has pitched Oklahoma's criminal justice system into a state of emergency. Is that hyperbole or has there actually been a change in Oklahoma? So if you talk to the tribes, as I've done recently in speaking to some of their lawyers, it's hyperbole. The state, at least, they say that the governor's claims Governor Kevin Stitt, that those claims are at
the very least misleading, if not just outright false. They say that they're working to implement the ruling and that even though that McGrath decision has certainly brought a change, a huge change in how criminal justice is addressed in terms of increased tribal responsibility and federal responsibility in place of the states, they say that it's far from a nightmare that they're working to implement the decision, and from the tribes perspective, the problem, as they see it, is
the fact that the governor is trying to now overturn the decision, and so they see having to relitigate the issue as a waste of time when they're trying to address real issues. So the governor is trying to get the Supreme Court to overturn a decision it just made less term why right, So they're trying to overturn last
year's decision. Really, it's the same claims that they maid heading into the decision, and now they're just saying, Hey, all these bad things that we said we're going to happen have now happened, and we think this is an erroneous decision and you should reconsider it. That's the long and the short of their argument. Coming back to the court. The governor thinks that the replacement of the late Ruth Bader Ginsburg, who ruled against Oklahoma, with any Coney Barrett,
is going to make a difference. So he's betting on the new composition of the court. That's what he said. I saw a radio interview that he did in Oklahoma earlier this year where the governor said as much, and so at least from his perspective, he's hoping that that change will help. And it's hard to see how he wouldn't need at least that change in personnel, because, as you mentioned, this was a decision that happened just last year.
All of the justices are the same except for that Ginsburg to Barrett switch, and so at the very least he would need the new justice to think differently, And he would also still need all of the justices who dissented to vote the same way this time around. And I'm not so sure that, for example, Chief Justice Roberts would want to go back on that decision, even though he wrote the dissent and was very much against how the majority came out. So what are Oklahoma's petitions before
the Supreme Court? How many are there and what do they say? So there are over thirty petitions that they've lodge in front of the court and we're waiting for the justices to consider them in the coming weeks and months. And there is one additional claim that they're pressing, which is sort of a follow on issue to McGirt in terms of how the decision applies to non Indians, and that's potentially an issue that the Court could take up.
But at the same time, they're either additionally or separately, just straight up pressing this claim to overturn McGirt. They point out that the Court doesn't always follow its prior decisions. We've seen in recent years the court overturning precedence. Of course, whenever you talk about precedent. Now we have to note I think that the Court is considering overruling the longstanding abortion precedence, and the state is saying that this was an erroneous decision and they just want the Court to
change its mind. It is remarkable that state officials are reminding the justices that they don't always follow their prior rulings. I mean, they cited a case that led Justice Stephen Bryer to wonder which cases the Court will overrule next, something which some of the liberal justices have noted in the past. Right, So it is remarkable in the sense
of seeing it so quickly after a recent decision. I think that would be forging new ground if the Court were to actually take up this attempts to overturn the decision and then side with Oklahoma and change in course. So it is certainly remarkable in one sense and another sense, perhaps the state thinks that as a shot at doing it, looking at how the court has acted recently and given the change in composition, I still don't think that that's
going to be successful. But perhaps the state is looking around and seeing that it thinks it might have a shot. Have the Indian tribes made real changes because of McGirt, So if the court took this an overrule McGirt, would there be a lot of reversals necessary? Yes, certainly. So since the mcgert decision, there's been a lot of work that's gone into implementing it. Everyone agrees that McGirt has
brought a huge change. There's been a huge increase in tribal responsibility in terms of increasing their jurisdiction, in terms of their caseload in terms of federal caseloads. So there's been a ton of work that's happened, even just since the mcgert decision came down in twenty twenties. So to say the least reverse and course would throw a wrench into that. The state is saying that the McGirt said and itself up ended years of a longstanding arrangement of
how criminal justice was conducted. But there's no question that reversing course now, even just a year or so after, would be a huge interruption in how tribes are working to implement the decision. So to put Oklahoma's request for the Supreme Court to hear this in context, the court is facing historically low public approval ratings and progressives are
calling for court packing. And you know, as you mentioned, the Court will be considering overturning the abortion precedent of Roe v. Wade, So is it likely to take another hot button issue? So I think for a lot of reasons that the Court is not even going to take up the question of whether to overturn the macgurt case. Of course, the Court has discretion over its docket in almost every situation, so it's not just that I think
the Court is not going to reverse course. I think it would be very surprising if the Court even granted cert and agreed to take up the question of whether to reverse course. I think there are other questions post mcgert, like the question of how it applies to non Indians, whether the ruling is retroactive, other aspects besides just the straight up question of whether to overturn it. So for a lot of reasons, I don't think the court is
going to be interested in taking up the claim. If it does even agree to hear the case, I would be very surprised. Lawyers for tribes say that the governor's fixation with overturning McGirt is hampering progress. What do they mean by that? Well, from the tribes view, they don't
see this criminal dystopia that the governor has portrayed. They see themselves as being busy with actually implementing the ruling, which is a significant expenditure in both time and money, and they see the mere fact of this litigation as being a distraction and something that's hampering progress. So from the tribe's perspective, it's almost that the biggest problem that they see is the mere fact of the governor now trying to overturn the decision that they're working to implements.
And though the governor has called the case the most pressing issue for Oklahoma, only a small percentage of Oklahoma's registered voters agree with that. That's right. According to a poll that I saw, only of registered voters agree with that, and so that would bolster the tribes claim that it's not the criminal dystopia that the state government is claiming
it to be. How much of Oklahoma's land has reverted to Indian jurisdiction percentage wise, So we're talking about, at least so far pretty much the eastern half of Oklahoma where reservations have been affirmed, as courts saying not just really that it's reverted, but technically that it's never gone away in the first instance. So we're looking just in
the eastern half. And as I mentioned, the so called Five Tribes, which in addition to the Creek which were at the center of the McGirt case, the Cherokee, Chickasaw, Choptaw, and Seminole tribes, those are really the main tribes at issue. Just recently we saw a sixth tribe that the Oklahoma State Court added, the Clappaw Nation. So we've seen the ripple effects of McGirt expanding even beyond the Five Tribes. But really for now we're talking about essentially the eastern
half of Oklahoma, which is significant. Turn into another case, Jordan's, the Supreme Court agreed to review whether double jeopardy bars prosecuting a defendant in federal district court after he's convicted in a court of Indian offenses. Tell us about that case. Sure, So, the Supreme Court recently agreed to review a double jeopardy case, and the question there is whether double jeopardy rules bar prosecution of a defendant in federal district court after he's
convicted in what's called a court of Indian offenses. And so the question there is going to be whether this Court of Indian Offenses counts as a tribal court or a federal court. And that's because under double jeopardy as it exists now, there's something called the separate sovereigns or dual sovereignty doctrine, which says that the law doesn't barb multiple prosecutions for the same offense so long as they're being prosecuted by separate sovereigns, meaning the state versus the
federal or tribal versus federal. So the question here is whether we're in fact talking about separate sovereigns when we talk about the Federal District Court and the Court of Indian Offenses. Just describe what the Court of Indian Offenses is. Sure, So, these are courts that are operating in places where tribes have jurisdiction over American Indians and states don't, but where there haven't been tribal courts that have been established to
take on that task. So they're essentially filling a gap there. And so that sort of quasi tribal quasi federal nature of them is what's leading to this question of what does the Court of Indian Offenses actually count as? Is it federal or tribal for purposes of this double jeopardy analysis, why would it be considered federal and not tribal? Well, these courts are called CFR courts. They're governed by the
Code of Federal Regulations. It's in the name itself. When we're talking about Indian law, we're talking about a lot of its stemming from federal law. So it's easy to understand how the state isn't involved. But the line between whether something is happening via federal jurisdiction or tribal jurisdiction can sometimes be blurry. This is coming from the Bureau
of Indian Affairs. We're talking about the federal government here, and so the line can be blurred sometimes, and so the question here is which side of the line does it fall on at least for these double jeopardy purposes. And tell us a little about the facts of the case. So this case involves Mr Denesbi and he was a Navajo tribal member. He was arrested by tribal authorities with violating tribal assault and battery law and with Code of
Federal Regulations, violations of terroristic threats, and false imprisonment. And he was charged in one of these CFR courts. He entered a plea and his remaining charges were dismissed, but he was later charged in a Colorado Federal District court with aggravated sexual assault. He was convicted there, sentenced to thirty years. And so he's raising a double jeopardy claim.
And you can see just from this case itself how significant the issue is, given how we're talking about either an added punishment of thirty years or just the hundred forty days of incarceration that he faced through this CFR court. So there are big implications for everyone involved. And tell us about that case in involving double jeopardy. Sure, So there was a case called Gamble against United States that was pending at the court a few years ago. They
decided it in. People were looking to that case to see whether the court was going to overturn this longstanding dual sovereignty or separate sovereigns dropped in. A lot of people were looking at it as something that was really unfair. You can be prosecuted for the same offense twice, regardless of whether it's in a separate sovereign. People don't necessarily
care about that. People are looking at the fact that you're being prosecuted twice, regardless of whether it was in a federal jurisdiction one time, a state jurisdiction, another tribal jurisdiction a third time. And so people were looking at that case. Critics of this dual sovereignty doctrine were anyway hoping that the court might reconsider it, but the Court
declined to do so. So there's no question that this doctrine is still alive, and now we just have a question of how it applies in this discrete situation involving these courts of Indian offenses. Thanks for being on the show. Jordan's that's Jordan Reuben of Bloomberg Law and that's it for this edition of the Bloomberg Law Show. Remember you can always get the latest legal news. Honor Bloomberg Law Podcast.
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