Shares in Barclays have fallen sharply, following allegations in the US that the UK bank misled large institutional investors and other clients by falsely telling them it was taking measures to protect them from predatory high-frequency traders.
New York attorney general Eric Schneiderman accused Barclays of misrepresenting the safety of its ‘dark pool’, a trading system under which trades can be conducted in private and which was publicised by author Michael Lewis in his latest book about Wall Street.
It marks a further setback for the bank, which is attempting to restore its reputation following the charges made against it during the London Interbank Offered Rate (Libor)-rigging scandal.
Schneiderman announced the latest allegations at a Manhattan news conference. The claim is that Barclays operated its dark pool to favour high-frequency traders – firms that use complex computer systems to buy and sell huge volumes of stocks in milliseconds to take advantage of often small movements in share prices.
The complaint, filed in state Supreme Court, portrays “a flagrant pattern of fraud, deception and dishonesty with Barclays clients and the investing public,” the attorney general said.
Scrutiny of dark pools intensified after the release in March of Lewis’s book,
‘Flash Boys: A Wall Street Revolt’
, which argues that high-frequency traders have rigged the stock market by taking advantage of systems unavailable to others.
Barclays’ dark pool, LX, is among the biggest. Recent data shows that in one week in June it traded more than 282m shares.
Barclays said it took the allegations seriously and had been co-operating with the attorney general and other regulators. “The integrity of the markets is a top priority for Barclays,” the bank said.
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