LONDON (Alliance News) - Trading in Barclays PLC's dark pool has seen a dramatic fall since the New York State Attorney General's allegations that the bank gave an unfair advantage to high-frequency traders at the expense of its other investor clients, despite presenting the trading platform as having special safeguards to protect against "predatory" or "toxic" traders.
According to data published by the US's Financial Industry Regulatory Authority, the number of shares traded in Barclays' dark pool, LX Liquidity Cross, fell by two-thirds in the week of June 30, from the week of June 23. The number of shares traded in the pool fell to 66.4 million from 197.0 million.
The data is for NMS Tier 1 equities. Data for NMS Tier 2 and over-the-counter equities is not as recent as for NMS Tier 1.
Attorney General Eric Schneiderman's lawsuit against the bank came on June 25.
In the week of June 16, immediately prior to the allegations, Barclays' dark pool had been ranked in second place in terms of volumes, with 312.1 million shares traded, only behind the 348.3 million of CROS Credit Suisse Securities (USA) LLC. Barclays was in the week of June 30 languishing in twelfth place, while Credit Suisse still occupied the top spot.
Barclays has said it is undertaking a "full internal investigation" into the allegations, and has appointed external help to ensure that the investigation can proceed quickly and objectively.
The lawsuit and the fall in volumes come after Barclays put equities trading at the heart of its investment banking division as part of a revamp unveiled in May to scale the investment banking unit down and make the bank better balanced as a whole.
Dark pools are networks where orders are not reported publicly, and are favoured for large, block orders due to the anonymity granted. Trade information is made public only after deals are completed. The trading platforms, along with high-frequency traders, have come under increased scrutiny in recent months, with the release of Michael Lewis's book, 'Flash Boys', in which he argued that high-frequency traders are able to gain an advantage over other investors by executing trades ahead of them.
https://ats.finra.org/TradingParticipants
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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Barclays (BARC)