Barclays enlists outside help in dark pools probe

Fri Jun 27, 2014 9:29am EDT
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By Steve Slater

LONDON (Reuters) - Barclays Plc (BARC.L: Quote) said it is bringing in outside help to speed up an investigation into alleged misconduct in its "dark pool" operations, which have rekindled concerns that the cost of past problems at its investment bank will rise.

More than 2 billion pounds ($3.4 billion) was wiped off Barclays' market value on Thursday after New York's attorney general filed a lawsuit against the British bank, accusing it of trying to grab extra profits from its alternative trading system while promising to get the best possible prices for customers.

The shares stabilized on Friday and were up 0.6 percent at 216.2 pence by 1200 GMT (8.00 a.m. ET) after tumbling 6.5 percent to a 19-month low on Thursday.

Dark pools allow institutional investors to trade large blocks of shares anonymously. Prices are posted only after deals are done, and the pools were created so that investors do not suffer a disadvantage by signaling their big orders.

But ever-larger volumes of trades have been shunted into them and critics say the opacity of the markets may be resulting in more investors getting ripped off.

Barclays' dark pool business, called LX, originally belonged to Lehman Brothers, the investment bank that collapsed in 2008. Barclays subsequently bought Lehman's U.S. business.

The business under scrutiny generates relatively modest revenues for the bank.

The 31-page summons issued by the attorney general said internal Barclays documents valued the growth opportunity from pushing more orders into its dark pool at between $37 million and $50 million per year.   Continued...

A "no parking" road sign is seen in front of a Barclays branch in downtown Rome May 8, 2014. REUTERS/Max Rossi