DealBook: New York Attorney General Accuses Barclays of Fraud 0ver Dark Pool

Tina Fineberg for The New York TimesThe Barclays building in New York.

Updated, 4:20 p.m. |
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.

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.

In addition, Mr. Schneiderman asserted that Barclays favors its own dark pool when routing client orders, contrary to the bank's claims.

Hiroko Masuike/The New York TimesThe New York attorney general, Eric T. Schneiderman.

A spokesman for Barclays, Mark Lane, declined to comment.

Mr. Schneiderman will detail the accusations at a news conference later on Wednesday. The complaint was filed in New York State Supreme Court.

A number of major banks run dark pools, which allow investors to submit buy and sell orders without alerting the market to their trading activity. This feature makes the pools attractive to big investors executing large orders of stock.

But dark pools have recently come under scrutiny by the Securities and Exchange Commission, which is considering requiring them to disclose more information about their operations.

The dark pool run by Barclays, Barclays LX, came to the bank through its acquisition of certain operations of Lehman Brothers in 2008. It is now among the biggest dark pools.

To conduct the investigation, the attorney general relied on former Barclays employees as well as documents obtained from the bank.

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