New York securities regulator files suit against Barclays

A lawsuit filed by New York’s top securities regulator against Barclays, alleges that it favoured high-speed traders using its “dark pool” trading venue, while misleading other investors. The 30-page complaint gives examples of what Eric Schneiderman, the state attorney-general, claims were the bank’s practices.

The lawsuit claims Barclays took advantage of its institutional investor clients, known as “the buy side”.

The complaint quotes a former director as saying: “[T]he way the deal would work is [Barclays] would invite the high frequency firms in. They would trade with the buy side. The buy side would pay the commissions. The high frequency firms would pay basically nothing. They would make their money off of manipulating the price. Barclays would make their money off the buy side. And the buy side would totally be taken advantage of because they got stuck with the bad trade . . . this happened over and over again.”

It quotes a former Barclays director as saying: “There was a lot going on in the dark pool that was not in the best interests of clients. . . It’s almost like they are building a car and saying it has an airbag and there is no airbag or brakes.”

The bank stands accused of falsifying analysis to minimise the extent of high-speed trading in the dark pool. A vice-president responsible for selling the dark pool to clients wrote about one analysis in October 2012: “I had always liked the idea that we were being transparent, but happy to take liberties if we can all agree.”

– (Copyright The Financial Times Limited 2014)