Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration 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 Boutique tapes: my business will never be sold

Boutique tapes: my business will never be sold

In the final part of our four part series we discuss consolidation and whether it's getting tougher for boutiques to survive.

Play Boutique tapes: are top managers better off at small firms?

Boutique tapes: are top managers better off at small firms?

In episode three of our series, boutique bosses discuss whether the best fund managers are more likely to thrive at smaller firms.

Play Boutique tapes: if you want a Ferrari, you have to pay for it

Boutique tapes: if you want a Ferrari, you have to pay for it

In the second part of our four-part series, boutique bosses are asked how they can justify the fees charged by active managers.

Read More
Your Business: Cover Star Club

Profile: how this boutique beat the big guns of wealth

Profile: how this boutique beat the big guns of wealth

This small west country offshoot of a local IFA scooped a 2018 Citywire award from beneath the noses of the national challengers

Wealth Manager on Twitter