New York AG Claims Barclays Misled Dark Pool Investors

New York Attorney General Eric Schneiderman has filed a complaint alleging Barclays PLC (Barclays) has deceived electronic trading investors.

The complaint alleges Barclays' marketing campaigns used "a series of false statements" about trading benefits to dramatically increase the market share of so-called "dark pool" trades from institutional investors whose identities are concealed from the public.

The bank allegedly misled dark pool investor clients by telling them it has implemented special safeguards to protect them from aggressive, predatory high-frequency traders while it favored these traders.

"The facts alleged in our complaint show that Barclays demonstrated a disturbing disregard for its investors in a systematic pattern of fraud and deceit," Schneiderman said in a press release.

For example, the complaint alleges that Barclays removed from a marketing document the name of a large, high-frequency trading firm that Barclays knew engaged in predatory behavior in the dark pool.

It also says that Barclays falsely promoted a service it claimed was a "surveillance" system that helped to identify, rate and hold accountable predatory traders in the dark pool based on their trading behavior.

According to the complaint, Barclays has never prohibited any trader from participating in its dark pool; did not regularly update the ratings of high-frequency trading firms the surveillance service monitored; and actively sought to attract high-frequency traders by giving them systematic advantages over other traders in the pool.

The complaint is part of a broader investigation into Barclays trading practices that Schneiderman launched last year, according to the release.