Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Barclays sued for ‘predatory’ & ‘disturbing’ dark pool trades

Barclays sued for ‘predatory’ & ‘disturbing’ dark pool trades

New York’s state attorney general is suing Barclays over dark pool trades.

Eric Schneiderman alleges Barclays ‘dramatically’ increased the market share of its dark pool through a series of false statements to clients and investors about how, and for whose benefit Barclays operates the unit.  

Contrary to Barclays’ representations that it has implemented special safeguards to protect clients from ‘aggressive’ high frequency trading, Barclays is accused of operating its dark pool to favour this very type of trader.

‘The facts alleged in our complaint show that Barclays demonstrated a disturbing disregard for its investors in a systematic pattern of fraud and deceit,’ Schneiderman said.

‘Barclays grew its dark pool by telling investors they were diving into safe waters. According to the lawsuit, Barclays’ dark pool was full of predators – there at Barclays’ invitation.’

Dark pools allow investors to trade large tranches of shares anonymously to minimise market impact, with prices quoted once deals are done.

The lawsuit alleges Barclays falsified marketing material to show the extent and type of high frequency trading in its dark pool.

It cites an example where Barclays  removed from a marketing document intended for institutional investors the dark pool’s then-largest participant – a high frequency trading firm Barclays knew engaged in predatory behaviour in the dark pool.  

In response, one employee is said to have stated: ‘I had always liked the idea that we were being transparent, but happy to take liberties if we can all agree.’

The lawsuit also highlighted Barclays heavy promotion of a services called Liquidity Profiling, described by the bank as a system that tracked every trade in Barclays’ dark pool to protect against predatory traders.

According to the bank, the system rated traders based on the objectives and characteristics of their behaviour.

However, Schneiderman claimed  this Liquidity Profiling service was ‘misrepresented’  and failed ‘to provide many of the benefits marketed with the service’.

A number of former Barclays employees assisted Schneiderman’s investigation.

‘No regulator – no matter how broad their authority – can succeed on its own,’ said Schneiderman said. ‘I want to personally thank those that have courageously reported wrongdoing to our office and encourage others to do the same.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Navigating geopolitical risk with ETFs

Navigating geopolitical risk with ETFs

ETFGI’s Deborah Fuhr on how investors can use exchange-traded funds to position their portfolio.

Play Sarasin’s Boucher: why I like salmon with chocolate

Sarasin’s Boucher: why I like salmon with chocolate

Henry Boucher, manager of the £129 million Sarasin Food & Agriculture Opportunities fund, explains why he is gobbling up salmon and chocolate stocks.

Play Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Libby Ashby and leading wealth managers analyse what the Alibaba IPO hype means for Chinese equities, slowing growth of the UK economy and whether there’s anything left to play for in the European sovereign bond market.

Your Business: Cover Star Club

Profile: How David Esfandi is shaping Canaccord Genuity WM

Profile: How David Esfandi is shaping Canaccord Genuity WM

After six months as chief executive of Canaccord Genuity David Esfandi's ambitions are taking shape

Wealth Manager on Twitter