(Adds details of the settlements, comments from New Yorkattorney general and background)
By Sarah N. Lynch
WASHINGTON, Jan 31 (Reuters) - Barclays and CreditSuisse are poised to settle federal and state chargesthat they misled investors in their dark pools, with Barclaysadmitting it broke the law and agreeing to pay $70 million, theNew York attorney general's office said Sunday.
The settlements between the banks and the U.S. Securitiesand Exchange Commission and the New York attorney general, whichare expected to be formally announced on Monday, will mark thetwo largest fines ever paid in connection with cases involvingdark pools.
At the heart of the cases against both Barclays and CreditSuisse are allegations that they misled investors in the darkpools, saying they would be protected from predatoryhigh-frequency trading tactics.
Altogether, the banks are expected to pay a combined totalof $154.3 million.
Of that, Barclays will pay a $70 fine split evenly betweenthe SEC and New York state, admit it violated securities lawsand agree to install an independent monitor to ensure that itsdark pool "Barclays LX" operates properly in the future.
Credit Suisse will pay a $60 million fine split between theregulators, plus an additional $24.3 million in disgorgement tothe SEC for executing 117 illegal sub-penny orders out of itsdark pool known as "Crossfinder."
As part of the settlement, Credit Suisse will neither admitnor deny the allegations.
Representatives of both banks declined to comment on thepending settlements.
Dark pools are trading venues that differ from publicexchanges because orders are not visible to other traders untilthey are executed.
The lack of pre-trade price information is designed to helpinstitutional investors trade large blocks of shares without themarket moving against them.
The pending settlement with Barclays marks a dramatic end toa high-stakes public legal battle between the bank and New Yorkstate Attorney General Eric Schneiderman.
Schneiderman's office filed a lawsuit against Barclays inJune 2014 alleging fraud in its dark pool.
The lawsuit alleged that the bank told investors it had a"liquidity profiling" service that was meant to let traditionalinvestors opt out of trading with high-speed traders.
In fact, Schneiderman's office said, the program was riddledwith "exceptions" that favored high-speed traders.
The bank also disseminated trading analysis materials toinvestors that intentionally deleted its largest and mostaggressive trader, Schneiderman's office said.
The lawsuit came in the wake of the furor over MichaelLewis's book "Flash Boys," which claimed the stock market isrigged in favor of high-frequency traders.
Barclays lost a bid to have the case dismissed last year.
"These cases mark the first major victory in the fightagainst fraud in dark pool trading that began when we first suedBarclays," Schneiderman said in an emailed statement. "We willcontinue to take the fight to those who aim to rig the systemand those who look the other way."
An SEC representative could not immediately be reached forcomment on Sunday.
Regulators are not expected to announce any charges onMonday against individuals at the banks.
However, Schneiderman's office said that Barclays madepersonnel changes after the lawsuit was filed by removing twoemployees in the electronic trading from their supervisoryroles. (Reporting by Sarah N. Lynch in Washington and Herbert Lash inNew York; Editing by Andrea Ricci and Jonathan Oatis)