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(Adds comment from Barclays, background)
By Herbert Lash
NEW YORK, Sept 16 (Reuters) - The New York attorney generalon Tuesday rebutted Barclays Plc's motion to dismissthe state's lawsuit alleging fraud in how it ran a privatetrading platform, calling the arguments in the petition"misguided" and "disingenuous."
New York Attorney General Eric Schneiderman again blastedBarclays for allegedly not protecting customers from"high-frequency" traders in its trading venue, despite repeatedassurances to clients by the bank that it was doing so.
Schneiderman moved to knock down a key argument in Barclays'motion, that the lawsuit falls outside of the scope andauthority of the New York's securities laws, a powerful statueknown as the Martin Act.
Schneiderman said the 1921 statue has long co-existed withfederal securities regulation and enforcement, and he said thatthe suggestion in Barclays' motion that federal law should takeprecedence in matters of securities fraud is misguided.
A spokesman for Barclays said the bank will continue tocooperate with the attorney general, but the complaint is basedon clear and substantial factual errors.
"We do not believe that this suit is justified, and we havea duty to our shareholders, clients and colleagues to defend ourposition," said the spokesman, Mark Lane.
The attorney general also took issue with Barclays'assertion that customers trading in its "dark pool" tradingplatform were never misled as they were sophisticated investors.
"Conduct that deceives even sophisticated investors ishardly excluded from oversight and enforcement," Schneidermansaid.
The complaint, filed in June, alleged that Barclays promisedto ensure the best possible price for orders but instead tooksteps that maximized the bank's profits.
Nearly all trades were executed on its dark pool called LXwhen better prices might have been obtained if Barclays had senttrades to other stock exchanges or venues, the complaint said.
The lawsuit is the highest profile case yet as U.S.authorities move to make trading more transparent as more andmore trades are executed on dark pools and other alternativetrading systems where prices are not immediately posted.
Schneiderman repeated previous allegations thatrepresentations made by Barclays about its dark pool were false,such as the protections it offered against aggressivehigh-frequency trading and how it routed client orders.
"Barclays' false assurances are manifested in the theme setforth in its marketing material: 'Protecting clients in thedark,'" the attorney general said.
Barclays has until Oct. 12 to respond, after which the casewill go to trial if a settlement isn't reached. (Reporting by Herbert Lash; Editing by Chris Reese, SteveOrlofsky and Bernard Orr)
