The New York attorney general has announced the filing of a securities fraud lawsuit against Barclays Bank PLC for giving an unfair advantage to some of its US high-frequency trader clients, while offering misleading information to their other clients.
According to the filings, the attorney general alleges that the bank was producing false documentation and misrepresenting its systems with the outward intention of protecting some clients from aggressive trading. There are further allegations that it made promises to seek out the best share prices for its customers buying and selling shares, but instead the bank took steps to maximise its profit at the expense of their clients’ deals.
This is the latest, and highest profile, case in a series of actions taken by the New York Attorney General’s office against traders and dealer
The lawsuit makes reference to a ‘dark pool’ of trading operations that allowed clients to trade large blocks of shares while keeping pricing information more private instead of trading at exchanges or other places where prices might have been more favourable.
This is the latest, and highest profile, case in a series of actions taken by the New York Attorney General’s office against traders and dealer. The actions are targeting traders and dealers that may be taking advantage of automated trades to rip off customers. Investigations have been going on for over a year, with efforts being stepped up in recent months.
“Barclays grew its dark pool by telling investors they were diving into safe waters,” New York Attorney General Eric Schneiderman said in a statement. “Barclays’ dark pool was full of predators – there at Barclays’ invitation.”
Dark pools were originally created to provide an environment where investors could trade without alerting the market. The US Securities and Exchange Commission have been investigating the potential for fraud involving high frequency trading in these environments.
Barclays said in a statement that it is cooperating with authorities, and taking these allegations ‘very seriously’.
