‘Dark Pools’ Probe Extends to UBS and Deutsche Bank

The widening regulatory probe into so-called ‘dark pool’ alternative trading platforms has extended to Deutsche Bank and UBS. Both banks revealed in the newly-released second quarter results that they are helping financial watchdogs with their investigations.

Dark pools are trading systems enabling investors to buy and sell securities anonymously, which may mean they can obtain a better price. However, regulators have voiced concerns that the resulting lack of transparency could allow some of a bank’s clients to take advantage of others.

UBS said that it had been contacted by various different global regulators investigating dark pools, including the US Securities and Exchanges Commission (SEC) and the New York Attorney General.

Deutsche Bank said that it had received “requests for information” from certain regulators related to high frequency trading and was cooperating with them. It added that the bank has been named as a defendant in putative class action complaints alleging violations of US securities laws related to high frequency trading.

Last month New York attorney general Eric Schneiderman, said that Barclays had failed to inform clients that “predatory high-frequency traders” were active in the bank’s dark pool trading venue. High-frequency traders use complex algorithms and advanced technology to make split-second trades and benefit from tiny discrepancies in price and access market-sensitive information such as pending orders.

Schneiderman accused the bank of engaging in “a flagrant pattern of fraud, deception and dishonesty with Barclays’ clients and the investing public”. Barclays responded by filing a motion at the Supreme Court of the State of New York to have Schneiderman’s lawsuit dismissed, claiming it was without merit of jurisdiction.


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