New York AG slaps Barclays with securities fraud suit

Wed Jun 25, 2014 6:40pm EDT
 
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By Karen Freifeld and John McCrank

NEW YORK (Reuters) - The New York Attorney General on Wednesday filed a securities fraud lawsuit against Barclays PLC (BARC.L: Quote) for misrepresenting the safety of its U.S.-based alternative trading system, or "dark pool," to investors.

The lawsuit alleges that in order to increase business in its dark pool, Barclays has favored high-frequency traders and has actively sought to attract them by giving them systematic advantages over other investors trading in the pool.

"Barclays grew its dark pool by telling investors they were diving into safe waters," said Attorney General Eric Schneiderman. "According to the lawsuit, Barclays' dark pool was full of predators - there at Barclays' invitation." 

Barclays declined to comment.

Broker-run trading systems known as dark pools, where participants are anonymous and trading information is hidden until after the trades are completed, are a key focus of Schneiderman's sweeping investigation into the U.S. stock market.

His office is looking into whether dark pools operate in a way that is consistent with how they market themselves, that they have the interests of investors in mind and that brokers directing trades to their own dark pools do so in a way that does not present conflicts of interest.

OPEN DOOR   Continued...

 
Raindrops are seen on the logo of a rental bicycle sponsored by Barclays in London May 8, 2014.    REUTERS/Stefan Wermuth