NEW YORK, July 14 (Reuters) - Volume in Barclays PLC's private U.S. trading venue, also known as a "darkpool," fell by more than a third after New York's attorneygeneral filed a lawsuit accusing the British bank of giving anunfair edge to high-speed traders, according to data released onMonday.
The number of shares traded in Barclays' LX, an alternativetrading system or dark pool, dropped about 37 percent in theweek of June 23 to around 197 million shares, from around 312million shares the week before, according to a report by theFinancial Industry Regulatory Authority. The report from FINRA,Wall Street's self-funded regulator, included only the mostwidely traded securities.
Dark pools are broker-run trading venues that let investorstrade shares anonymously and only make trading data availableafterwards, reducing the chance of information leaking abouttrade orders. The lack of transparency has drawn the scrutiny ofregulators.
New York Attorney General Eric Schneiderman said on June 25that he had evidence that Barclays staff had falsifiedmarketing materials and misled big institutional clients in aneffort to expand its dark pool and increase revenues. He accusedthe British bank of giving an edge to brokers and proprietarytrading firms that use aggressive high-frequency tradingstrategies, while telling other clients it was protecting themfrom such tactics.
Deutsche Bank , Credit Suisse , Royal Bank of Canada , andInvestment Technology Group were among several brokers and banks that said they had stopped routing orders to Barclays'dark pool after the securities fraud lawsuit was filed.
For the week of June 23, Barclays' dark pool was thefifth-largest in the United States, down from the second largestthe week before. Dark pools run by Credit Suisse, UBS,Deutsche Bank and Bank of America's Merrill Lynch hadmore volume.
In early June, dark pool operator Liquidnet paid $2 millionto the U.S. Securities and Exchange Commission to settle chargesthat the electronic trading network had improperly used itssubscribers' confidential trading information to market itsservices. On July 1, Goldman Sachs agreedto pay an $800,000 fine to FINRA to settle a case over pricingrule violations in its dark pool. (Reporting by John McCrank; Editing by Jan Paschal)
Barclays (BARC)