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Thursday, June 26, 2014

The Dark Pools of Barclays

Barclays, a bank that likes to remain in the headlines, finds itself once more the subject of media attention. This time the subject is that of "Dark Pools" (anonymous trading venues that do not make any trading information available until after the trades have been completed).

New York's Attorney-general Eric Schneiderman has claimed that Barclays duped investors by telling them they were investing in a safe places, when in fact they were exposed to high frequency trading predators. As such, Barclays is being sued over claims it falsified marketing material to mislead people into investing in its dark pools.
Mr Schneiderman is quoted by the Telegraph:
The facts alleged in our complaint show that Barclays demonstrated a disturbing disregard for its investors in a systematic pattern of fraud and deceit.

Barclays grew its dark pool by telling investors they were diving into safe waters. Barclays’ dark pool was full of predators – there at Barclays’ invitation.
Mr Schneiderman alleged that 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.

The attorney general's office quoted one Barclays employee as saying:
I had always liked the idea that we were being transparent, but happy to take liberties if we can all agree.
Another allegedly said:
"If we can help ourselves we should; it's in our control."
The attorney general's office claimed that Barclays "has never prohibited any trader from participating in its dark pool, regardless of how predatory its activity was determined to be" and gave "safe" ratings to traders that were found to be toxic.
"Barclays operates its dark pool to favour high-frequency traders and has actively sought to attract them by giving them systematic advantages over others trading in the pool." 
Barclays said in a statement:
We take these allegations very seriously. Barclays has been cooperating with the New York Attorney General and the SEC and has been examining this matter internally. The integrity of the markets is a top priority of Barclays.”
This will be worth following.

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