July 20 Trading firms and employees raised
concerns about high-speed traders at Barclays Plc's
"dark pool" months before the United States accused the bank of
favoring its high-frequency trading clients, the Wall Street
Journal reported, citing people familiar with the firms.
New York Attorney General Eric Schneiderman filed a lawsuit
last month, accusing the Barclays dark pool of giving
high-frequency traders an unfair advantage, even though the bank
had promised investors they would be protected from "predatory"
and "toxic" traders.
The lawsuit alleges that Barclays executed nearly all of
its customers' stock orders on its LX Liquidity Cross dark pool
alternative trading system instead of on exchanges or other
venues that might have offered better prices.
Some big trading firms noticed that their orders weren't
getting the best treatment on the dark pool and began to grow
concerned that the poor results were due to high-frequency
trading, the Journal said. (on.wsj.com/1tocIWT)
Dark pools let institutional investors trade large blocks of
shares anonymously and only make trading data available
afterwards so that investors with large orders are not at a
A number of Barclays employees also privately expressed
concerns to top stock-trading executives that the London-based
bank was giving high-frequency traders too much access to its
dark pool without fully informing clients, the newspaper said.
Barclays is expected to respond to the attorney general's
civil complaint this week, the report said, adding that the bank
is expected to argue that certain emails and other documents
cited in New York's complaint were taken out of context.
Reuters reported last month that Barclays had hired external
lawyers to help it investigate the allegations, including
Matthew Martens, formerly the chief litigator at the U.S.
Securities and Exchange Commission.
Representatives from Barclays could not be immediately
reached for comment outside regular business hours.
(Reporting by Supriya Kurane in Bangalore; Editing by Gopakumar