NY Attorney General Files Civil Charges against Barclays over Dark Pool and High-Frequency Trading

On Wednesday, June 25, New York Attorney General Eric Schneiderman filed civil fraud charges against Barclays Capital, Inc. and Barclays PLC (collectively, "Barclays") regarding its dark pool, "Barclays LX."

The complaint alleges that, in an effort to increase the market share of Barclays LX, Barclays made "false statements to its clients and the investing public about how, and for whose benefit, Barclays operates its dark pool." The allegations include: intentionally excluding information about the dark pool's then-largest participant (a high-frequency trading ("HFT") firm that Barclays knew engaged in predatory trading behavior), falsely marketing the amount of aggressive HFT activity in Barclays LX and falsely representing the steps that Barclays was taking, using its "Liquidity Profiling" service, to clients to protect them from predatory HFT activity within Barclays LX. The complaint alleges further that Barclays routed a "disproportionately high" percentage of client orders to Barclays LX while making misleading statements to clients that Barclays routed orders in a manner that did not favor Barclays' own dark pool over other trading venues.

The complaint seeks the following judgment from Barclays:

• An accounting of all fees, revenues and other compensation received directly or indirectly from its dark pool business;
• Payment for damages caused, directly or indirectly, by the fraudulent and deceptive acts;
• Disgorgement of all amounts obtained in connection or as a result of its violations; and
• Restitution of all funds obtained from investors in connection with fraudulent and deceptive acts.

See: Complaint: State of NY v. Barclays.