A US lawsuit has been filed against Barclays for fraudulent “dark pool” trading practices.
The lawsuit, filed by the New York attorney-general Eric Schneiderman, alleges that Barclays misrepresented the kinds of investors that were trading within its dark pool.
Schneiderman says: “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. According to the lawsuit, Barclays’ dark pool was full of predators – there at Barclays’ invitation.”
Dark pools are private markets in which banks allow certain investors to trade without the full transparency and regulation of an open market, allowing traders to operate almost entirely unsupervised.
Institutional investors can purchase and sell large blocks of shares through dark pools, without posting the trades publicly until after they are executed and filled. In doing so, the investors are not subject to the same market movements as in an open market, where prices are shifted by large orders.
Responding to the lawsuit, Barclays issued a statement in which it says: “We take these allegations very seriously. Barclays has been co-operating with the New York attorney general and the SEC and has been examining this matter internally.”