* Bank says lawsuit fails to identify any fraud
* No victims, harm or material misstatements established -
(Adds Schneiderman statement, paragraph 5, additional byline
By Herbert Lash and Steve Slater
NEW YORK/LONDON, July 24 Barclays Plc
urged the dismissal on Thursday of a lawsuit from the New York
attorney general alleging the bank lied to clients about its
high-speed trading venue, saying the complaint had "fatal flaws"
because Barclays' customers were never misled.
The bank's motion to dismiss the lawsuit against its private
trading venue - or "dark pool" - said the attorney general
failed to identify any fraud, and did not establish material
misstatements, identify victims or actual harm.
Barclays said the lawsuit filed by Attorney General Eric
Schneiderman had clear and substantial errors. Should litigation
proceed, the bank said it would show how baseless the
"The very marketing documents and e-mails from which the
complaint selectively quotes, along with the complaint's other
fatal flaws, are sufficient to require dismissal of this 'fraud'
action," the motion said.
In a statement from a spokesman, Schneiderman stood his
ground, saying the lawsuit detailed how Barclays engaged in "a
persistent pattern of fraud and deceit, lying to its investors
in order to grow its dark pool."
Barclays said Schneiderman lacked the authority to accuse
the bank of wrongdoing under New York's Martin Act, which aims
to protect investors when the purchase, sale or exchange of a
security is misrepresented.
Barclays' clients are highly sophisticated traders and money
managers who are capable of closely monitoring the quality of
their trades based on execution data, not glossy marketing
brochures or quotes from magazine articles, the bank said.
The allegations are premised on mischaracterizations of
documents portrayed in the complaint in a way that removes
important information and context Barclays provided about high
frequency traders and "aggressive" trading, the bank added.
It said sales materials the bank showed clients were
misconstrued, in one case making one document appear as if it
were two. Seen as one document, Barclays argued a sophisticated
investor would fully understand the intricacies of trading on
its high-frequency venue known as LX.
Barclays said in a statement that it works closely with
regulators in all jurisdictions and will continue to cooperate
with the New York attorney general.
"However, we do not believe that this suit is justified, and
we have a duty to our shareholders, clients and staff to defend
our position," the bank said.
Schneiderman's fraud claims could hang over Barclays well
into next year, as it typically takes at least six months for a
decision to be made on whether to dismiss a complaint or proceed
The attorney general's lawsuit against Barclays was filed on
June 25. It accuses the bank of giving high-frequency traders,
using advanced computer systems and algorithms to trade
securities in milliseconds, an unfair advantage over investors.
The lawsuit marks the highest profile case yet stemming from
scrutiny of high-frequency trading by U.S. authorities. Trading
activity in Barclays' dark pool slumped by more than
three-quarters in the two weeks after the lawsuit, and its
shares are down 7 percent since the complaint was filed.
(Additional reporting by Karen Freifeld in New York, reporting
by Herbert Lash; Editing by Chizu Nomiyama and Tom Brown)