An investor who accused certain Philadelphia Stock Exchange investor groups of using a sophisticated trading strategy to deprive other investors of Pfizer Inc. dividends on Tuesday urged the Third Circuit to revive his securities class action, arguing that investors rely upon on a bona fide market, free of manipulation.

The alleged conspiracy by “market makers” such as Bedrock Trading Ltd. of making large, prearranged trades of Pfizer stock on the eve of purchase cutoff dates limited the ability of smaller investors such as I. Stephen Rabin the ability to “skate,” or reap windfalls of dividends, had enough unexercised options remained on the market, a three-judge panel heard during oral argument in Philadelphia. The market makers enjoy a privilege of being permitted to hold both buy and sell positions on the same stock, giving them an edge over the proposed class that Rabin seeks to represent, according to his suit.

However, the fee caps helped regulate the marketplace, and Rabin could have lodged a challenge at the regulatory level, according to stock exchange attorney Stephen J. Kastenberg of Ballard Spahr, representing Nasdaq OMX PHLX and Nasdaq OMX Group Inc.

But Rabin “never went to the [U.S. Securities and Exchange Commission], never asked them to advocate for the rule change,” Kastenberg told the panel.

The stock exchanges are represented by Stephen J. Kastenberg and Paul Lantieri III of Ballard Spahr LLP.

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