Published On: Fri, Jan 23rd, 2015

Eric Schneiderman Submits New Complaint Against Barclays in ‘Dark Pools’ Lawsuit

‘Dark Pools’

Building on a previous lawsuit over Barclays Bank’s private stock trading platform, New York State’s top law enforcer filed a complaint alleging that the bank defied subpoenas seeking the testimony of executives and made a false statement in court documents, the New York Times said.

Barclays’ assertion in a court filing last fall that it had instructed a high-frequency trading firm to cease trading on the platform was false, according to the amended complaint submitted to the New York State Supreme Court on Wednesday by Attorney General Eric Schneiderman, the Times said.

In addition, despite subpoenas, Barclays has failed to produce William White, the head of electronic trading, and David Johnsen, the head of product development, for questioning, according to the complaint and officials in the attorney general’s office, the report said.

In a statement, Barclays said the amended complaint “merely repackages the same flawed arguments that were in the original complaint, ” which it has sought to have dismissed. “While we continue to seek to cooperate with the New York attorney general in this matter, we will continue to defend vigorously against these allegations, ” the statement said, according to the Times.

In a court filing on Wednesday evening, Barclays sought to have the subpoenas quashed, arguing that the attorney general lacked the legal authority to pursue them. Barclays asked the court to halt all discovery until a ruling on the bank’s effort to dismiss the case, the Times said.

The latest action stems from a lawsuit originally filed by Mr. Schneiderman last June, in which he claimed that Barclays lied about the concentration of high-frequency traders in the trading platform, or dark pool, known as LX. Barclays said it would protect other investors from predatory trading behavior, but it largely failed to do so, the attorney general claimed, the report said.

Dark pools have been in the regulatory crosshairs because prices are not posted in real time and trades are revealed after they have been executed. Schneiderman and other critics allege that secrecy has sometimes masked practices that favor traders who use thousands of rapid-fire trades over other investors, the Financial Times said.

The lawsuit is a rare instance where a large bank and Schneiderman are prepared to go at it in courts, instead of negotiating a settlement behind closed doors, Forbes said.

For Barclays, contesting Schneiderman is a tremendous risk. The New York Attorney General has extracted billions from the bank and its peers for misdeeds ranging from interest rate and currency trading to the packaging of mortgage securities prior to the financial crisis, according to Forbes.

Schneiderman has vowed to better-police electronic stock trading amid scrutiny into dark pools, high frequency traders and the ongoing mystery of a 2010 flash crash that sent U.S. stock markets tumbling, the report said.

 

 

 

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