NY Sues Barclays Over Alleged High Speed Trading Favors in Dark Pool

New York Attorney General Eric Schneiderman has filed a securities fraud lawsuit against Barclays (BARC) Plc. accusing the British bank of lying about giving preference to high-frequency traders. The state contends that Barclays took part in fraudulent activity related to a dark pool. The British-based bank has 20 days to respond to the securities fraud charges.

Financial Industry Regulatory Authority data says that for the first week of June 2014, LX was the number two biggest alternative trading system in the United States. According to the high frequency trading case, LX, which is Barclays’ dark pool, favors computer-driven firms that can weave their way through the market at super fast speeds yet downplays how much these high-frequency traders use the venue.

Schneiderman says that the bank falsely depicted the way it routes the orders of clients and claimed to protect them from high-speed firms, when really the dark pool was run to the advantage of these traders. He claims that Barclays even specifically sought to bring in high-speed traders to LX, giving them preferential treatment over others by providing them with details about the way the dark pool is run.

According to his complaint, over a dozen high-frequency firms, including Virtu Financial Inc., Jump Trading LLC, and Citadel LLC, took part in “significant trading activity” on the LX venue. The firms are not part of this case.

Recently, the Securities and Exchange Commission announced that it is investigating dark pools. The regulator wants to know if these trading venues are providing accurate disclosure about the way they are run and if investors are treated equally. The SEC is concerned that the high speed in which stocks are sold and bought may place retail investors at a disadvantage.

If you are a retail investor who has sustained losses that you believe may be the result of securities fraud, contact Shepherd Smith Edwards and Kantas, LTD LLP today.

New York Attorney General Sues Barclays Over Stock-Trading Business, The Wall Street Journal, June 25, 2014

Cracks Open in Dark Pool Defense With Barclays Lawsuit, Businessweek, June 26, 2014

More Blog Posts:
SEC To Tackle High-Speed Trading, Dark Pools With New Initiatives, Stockbroker Fraud Blog, June 6, 2014

FINRA Headlines: SRO Fines Goldman Sachs, Merrill Lynch, and Barclays Capital $1M Each & Makes Dark Pool Data Available, June 7, 2014
Pennsylvania Private Equity Firm Settles SEC Charges Over “Pay to Play” Violations Related to Political Campaign Contributions, Institutional Investor Securities Blog, June 23, 2014