News that Barclays will face US prosecutors for allegedly misleading institutional investors who use its dark pool has caused major banks to withdraw from the anonymous trading venue.
The Financial Times reported that major banks such as Deutsche Bank, Credit Suisse and Royal Bank of Canada were among those that opted to leave Barclays’ LX dark pool after the news broke that Barclays faces a lawsuit. New York attorney general Eric Schneiderman accused Barclays of 'fraud and deceipt' since 2011, alleging the bank lied to clients about the level of protection they would receive in its dark pool from high frequency traders.
The news wiped over $13 billion off the market value of the 10 biggest dark pool owners, as analysts speculated that US prosecutors might target others. Barclays' share price was down more than 6%, while shares in other dark pool operators including Credit Suisse, UBS and Deutsche Bank also fell.