This won't put any of the bankers in jail--a place some of them still belong--because it's only a civil suit. But, glad to see this from New York State Attorney General Eric Schneiderman: he's suing Barclays for fraud.
He just announced this:
The top law enforcer in New York State, Eric T. Schneiderman, announced on Wednesday that he had filed civil fraud charges against Barclays over its private stock trading platform, contending that it favored high frequency traders over other investors.From Wall Street Journal web story:
Mr. Schneiderman, the New York State attorney general, is accusing Barclays of falsely representing the concentration of high frequency traders in its private trading platform, known as a dark pool. The attorney general said that the British bank falsified marketing materials and misrepresented a service that purported to protect investors from predatory trading behavior.
Barclays' dark pool, LX, was the second largest alternative trading system in the U.S. for the week of June 2, according to data from the Financial Industry Regulatory Authority. LX saw a total of more than 282 million shares traded during the period.Quick note on "dark pools", from this longer Wall Street Journal piece[pay wall]:
The suit is expected to allege that Barclays' dark pool favors so-called high-frequency traders but has misrepresented the degree to which such traders use the venue, according to a person familiar with the matter. It also will claim that the bank has falsely portrayed how it routes clients' orders, the person added.
Introduced in the early 2000s, there are roughly 40 dark pools operating today. These secretive venues handle 13% of all trades. Not to be left out, dark pools overseas are rising. Volume in European dark pools reached a record $10 trillion last year, or about 9.5% of all trades.
Unlike the old days when a broker had to make a large order public by taking it to the exchange floor, dark pools offer anonymity. The buyer or seller shows his or her hand to a select group of similarly secretive participants. They could be brokerages, pensions, mutual funds or hedge funds.
This week, two major operators of dark pool trading venues, Goldman Sachs Group Inc. and Credit Suisse Group opened a door into how their respective markets work. They published documents outlining how bids and offers are posted, trades executed and when those trades are made public.
Dark-pool operators are getting defensive and opening up because they’re under scrutiny. Critics such as Michael Lewis, author of “Flash Boys: A Wall Street Revolt,” say that dark pools are used by high-speed traders to gain a speed advantage to essentially front run the public markets. The Financial Industry Regulatory Authority, the brokerage industry’s self-regulatory body, is investigating dark pools and how they might enable unfair trading