Barclays to Pay $150 Million Over 'Last Look' Trading System
November 18 2015 - 11:10AM
Dow Jones News
Barclays PLC has agreed to pay $150 million to resolve an
investigation by New York's banking regulator into a trading
practice that allowed the bank to exploit a milliseconds-long lag
between an order and its execution to its clients' detriment, the
latest fallout from the bank's foreign-exchange market
business.
The New York Department of Financial Services announced the
settlement Wednesday, and singled out the bank's misuse of its
"last look" system, which the regulator said allowed Barclay's a
last-second veto of unprofitable trades.
The penalty is the latest to stem from Barclays'
foreign-exchange trading, a line of business that, with today's
settlement, has cost the British bank more than $2.5 billion in
penalties. In May, Barclays pleaded guilty to conspiring to
manipulate the foreign-exchange market and agreed to pay $2.4
billion to a handful of U.S. agencies, including DFS, which
extracted a $485 million penalty at the time.
DFS on Wednesday also required the bank to fire its global head
of electronic fixed income, currencies and commodities automated
flow trading.
The "last look" system, which is a common practice in the
foreign-exchange currency market, creates a small gap between
client orders and the execution of trades, meant to guard Barclays
against so-called "toxic flow" orders by electronic traders that
would detect market movement some milliseconds before Barclays, and
exploit the price gap.
But, according to DFS, Barclays didn't use the system
defensively and instead used it to back out of orders that would be
profitable for clients but not for the bank, even when they weren't
toxic flow orders. When clients asked about the rejected trades,
Barclays blamed technical issues or gave vague explanations, DFS
said.
"This case highlights the need for greater oversight and action
to help prevent the misuse of automated, electronic trading
platforms on Wall Street, which is a wider industry issue that
requires serious additional scrutiny," acting DFS Superintendent
Anthony Albanese said in a statement.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
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(END) Dow Jones Newswires
November 18, 2015 10:55 ET (15:55 GMT)
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