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Barclays accused of 'dark pool' fraud | |
(about 2 hours later) | |
A fraud lawsuit against Barclays in the United States has been filed by the New York attorney general. | |
The lawsuit alleges that the bank falsified documents and misrepresented systems in place to protect certain investors from aggressive trading. | |
It relates to the bank's "dark pool" trading operations, which allow clients to trade large blocks of shares while keeping prices more private. | It relates to the bank's "dark pool" trading operations, which allow clients to trade large blocks of shares while keeping prices more private. |
Barclays said it was taking the allegations "very seriously". | Barclays said it was taking the allegations "very seriously". |
Prosecutors said Barclays misrepresented the kinds of investors that were using the dark pool. | Prosecutors said Barclays misrepresented the kinds of investors that were using the dark pool. |
'Full of predators' | 'Full of predators' |
New York attorney general Eric Schneiderman said: "The facts alleged in our complaint show that Barclays demonstrated a disturbing disregard for its investors in a systematic pattern of fraud and deceit." | |
"Barclays grew its dark pool by telling investors they were diving into safe waters. According to the lawsuit, Barclays' dark pool was full of predators - there at Barclays' invitation," he said. | "Barclays grew its dark pool by telling investors they were diving into safe waters. According to the lawsuit, Barclays' dark pool was full of predators - there at Barclays' invitation," he said. |
Analysis | Analysis |
Samira Hussain, BBC business reporter, New York | Samira Hussain, BBC business reporter, New York |
Dark pools are under the spotlight. | Dark pools are under the spotlight. |
There are at least 40 operating in the US where they compete against traditional exchanges. | There are at least 40 operating in the US where they compete against traditional exchanges. |
But these private platforms operate outside the public eye. | But these private platforms operate outside the public eye. |
And that's becoming a big issue, especially in this post-recession era, when banks have been blamed for a crippling financial crisis. | And that's becoming a big issue, especially in this post-recession era, when banks have been blamed for a crippling financial crisis. |
Regulators are taking a much closer look at everything banks do, especially things that can so easily fall under the radar. | Regulators are taking a much closer look at everything banks do, especially things that can so easily fall under the radar. |
The lawsuit said that Barclay's marketing material was misleading over the extent of high-frequency trading in its dark pool. | The lawsuit said that Barclay's marketing material was misleading over the extent of high-frequency trading in its dark pool. |
High-frequency traders use fast, sophisticated trading software and can make large profits on very small moves in share prices. | High-frequency traders use fast, sophisticated trading software and can make large profits on very small moves in share prices. |
The lawsuit accused Barclays of telling investors trading was being closely monitored and "predatory" traders would be held accountable. | The lawsuit accused Barclays of telling investors trading was being closely monitored and "predatory" traders would be held accountable. |
'Inside help' | 'Inside help' |
But in fact Barclays did not prohibit a single trader from operating in its dark pool, the lawsuit said. | But in fact Barclays did not prohibit a single trader from operating in its dark pool, the lawsuit said. |
In addition, the lawsuit alleges that Barclays operated its dark pool to favour high-frequency traders and "actively sought to attract them". | In addition, the lawsuit alleges that Barclays operated its dark pool to favour high-frequency traders and "actively sought to attract them". |
In a statement the bank said: "Barclays has been cooperating with the New York attorney general and the SEC and has been examining this matter internally. The integrity of the markets is a top priority of Barclays." | In a statement the bank said: "Barclays has been cooperating with the New York attorney general and the SEC and has been examining this matter internally. The integrity of the markets is a top priority of Barclays." |
The attorney general said that the investigation had been significantly helped by a number of former Barclays' employees. | The attorney general said that the investigation had been significantly helped by a number of former Barclays' employees. |
Other investigations | Other investigations |
Barclays has been the subject of several investigations, fines and settlements in recent years. | Barclays has been the subject of several investigations, fines and settlements in recent years. |
In May it was fined £26m by UK regulators after one of its traders was discovered attempting to fix the price of gold. | In May it was fined £26m by UK regulators after one of its traders was discovered attempting to fix the price of gold. |
In April, Barclays agreed to a $280m (£167m) settlement with the US Federal Housing and Finance Authority (FHFA). | In April, Barclays agreed to a $280m (£167m) settlement with the US Federal Housing and Finance Authority (FHFA). |
The agreement settles claims by the FHFA that Barclays misled US mortgage lenders Fannie Mae and Freddie Mac during the housing crisis. | The agreement settles claims by the FHFA that Barclays misled US mortgage lenders Fannie Mae and Freddie Mac during the housing crisis. |
In 2012 it was fined £290m by UK regulators for attempting to manipulate an important lending rate, known as Libor. | In 2012 it was fined £290m by UK regulators for attempting to manipulate an important lending rate, known as Libor. |