New York sues Barclays for fraud over 'dark pool' trading

New York prosecutors sued British bank Barclays for fraud on Wednesday, saying it ran a dark pool securities trading operation to the benefit of predatory high-frequency traders. -- PHOTO: AFP
New York prosecutors sued British bank Barclays for fraud on Wednesday, saying it ran a dark pool securities trading operation to the benefit of predatory high-frequency traders. -- PHOTO: AFP

NEW YORK (AFP) - New York prosecutors sued British bank Barclays for fraud on Wednesday, saying it ran a “dark pool” securities trading operation to the benefit of “predatory” high-frequency traders.

Attorney General Eric Schneiderman said Barclays promised clients that it would protect them from aggressive high-speed trading firms in the dark pools but at the same time took steps that benefited these firms.

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

“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.”

Mr Schneiderman said Barclays heavily promoted to its clients a “liquidity profiling” surveillance service it said would identify and hold accountable traders who engaged in predatory practices.

But Barclays has not prohibited any traders from participating in its dark pool, regardless of how predatory they were.

Mr Schneiderman said Barclays gave high-frequency traders “systematic advantages” over others in the pool and falsely underreported the number of aggressive high-frequency traders in the dark pool.

Transactions on “dark pools” take place on a private stock trading platform where there is little pre-trade pricing transparency.