Barclays was last night facing a fresh blow to its reputation after receiving a lawsuit over its "dark pool", the specialist trading system publicised by the author
In the latest setback for the bank as it battles to restore its reputation following the Libor-rigging scandal, the
Schneiderman is conducting a sweeping investigation into these trading systems at a time when some experts calculate high-frequency trading accounts for most of US stock market trading.
Scrutiny of the practice intensified following the March release of Lewis's book, Flash Boys: A Wall Street Revolt, which argues that high-frequency traders have rigged the stock market by taking advantage of systems unavailable to others.
Dark pools are a type of private market through which investors can deal without revealing their identities.
Barclays said it took the allegations seriously and had been co-operating with the attorney general and other regulators. "The integrity of the markets is a top priority for Barclays," the bank said.
Schneiderman said: "The facts alleged in our complaint show that Barclays demonstrated a disturbing disregard for its investors in a systematic pattern of fraud and deceit." He added: "Barclays grew its dark pool by telling investors they were diving into safe waters. According to the lawsuit,
The action by the US attorney general comes as Barclays attempts to clean up its public image after the
But Jenkins's attempts to show the culture of the bank is changing have been impeded by a number of issues, including a pounds 26m fine last month for failings relating to the way the price of gold is "fixed".
Like others, Barclays is part of a global investigation into the way currencies are priced. It also fighting a pounds 50m fine from the City regulator, the
The FCA says the bank "acted recklessly" but Barclays is contesting the findings, also subject to investigations by the Serious Fraud Office.
Schneiderman alleged Barclays made false claims about the extent and type of high-frequency trading in its dark pool. In one example he said the bank removed the name of a high-frequency trading firm, then the fund's largest participant, from its marketing material. The attorney general claimed the bank knew the trader engaged in predatory behaviour.
"Barclays heavily promoted a service called Liquidity Profiling, which Barclays claimed was a 'surveillance' system designed to hold traders accountable for engaging in predatory practices," Schneiderman's office said in a statement.
The latest accusations by the attorney general allege that:
* Barclays never prohibited any trader from participating in its dark pool, no matter how predatory.
* Barclays did not regularly update the ratings of high-frequency trading firms monitored by Liquidity Profiling.
* Barclays "overrode" certain Liquidity Profiling ratings.
Schneiderman alleged Barclays operated its dark pool to favour high-frequency traders and gave them systematic advantages to attract them. He said the investigation was aided "significantly" by a number of former Barclays employees.
The latest claims are a further blow to Barclays as it fights to restore its reputation in the wake of the Libor-rigging scandal
Most Popular Stories
- Businesses, Investors Pressing for Green Policy
- 'The Voice' Sounds Different This Season
- NSHMBA to Rebrand With New Name, Logo
- Lower Used-Car Prices Roil the Auto Industry
- Chrysler and Google Launch Virtual Plant Tour
- Investors Fret Yahoo's Future, Stock Dips
- Perry Wants to Skip Court for Foreign Trip
- Liberty Power Helps USHCC Go Green
- Hispanic Designer Honored As Rising Star
- Porn Lovers Get a New Search Engine