Credit Suisse, Barclays to Settle 'Dark Pool' Investigations -- 3rd Update
January 31 2016 - 2:19PM
Dow Jones News
By Bradley Hope and Jenny Strasburg
Credit Suisse Group AG and Barclays PLC are set to agree to pay
$154.3 million combined to settle investigations by regulators into
their "dark pools," officials said.
The record settlements are with the Securities and Exchange
Commission and New York Attorney General. A news conference is
scheduled for Monday.
"These cases mark the first major victory in the fight against
fraud in dark-pool trading that began when we first sued Barclays:
coordinated and aggressive government action, admissions of
wrongdoing, and meaningful reforms to protect investors from
predatory, high-frequency traders," said Eric T. Schneiderman, the
New York Attorney General, in a statement issued after The Wall
Street Journal published a report about the planned
announcement.
"We will continue to take the fight to those who aim to rig the
system and those who look the other way."
Representatives of the SEC, Barclays and Credit Suisse declined
to comment.
The agreements are the biggest and second-biggest settlements
related to dark pools, which are privately run stock-trading venues
that have come under greater scrutiny in the past several years.
Regulators and other critics have accused dark pools of providing
unfair advantages to professional traders at the expense of big
institutions.
The biggest settlement thus far is the $20.3 million New York
brokerage Investment Technology Group Inc. agreed to pay the SEC in
August. ITG admitted wrongdoing in its case.
Both banks made "false statements and omissions in connection
with the marketing of their respective dark pools and other
high-speed electronic equities trading services," the New York
Attorney General said in his press release.
Under the settlement, Credit Suisse will pay a total of about
$85 million--$30 million to each of the SEC and New York Attorney
General and $24.3 million in disgorged profits.
The settlement comes less than a month after Daniel Mathisson,
Credit Suisse's U.S. head of stock trading, said he was leaving the
firm. His group oversaw the bank's dark pools.
Barclays will pay about $70 million to settle charges that
include those brought in a high-profile fraud case by the New York
Attorney General against Barclays in connection with its dark pools
in June 2014. In that case, the New York Attorney General alleged
Barclays misled clients about the extent of high-frequency trading
in its dark pool, called LX.
Barclays admitted to misleading investors and violating
securities laws, and agreed to have an independent monitor review
operations of its electronic-trading division, according to the New
York Attorney General.
Both cases center in part on whether the banks misled some
clients about how the bank-owned trading venues prioritized certain
buy and sell orders, including whether they withheld information
that might have led clients to route orders elsewhere, people
familiar with the probes said.
Wall Street firms have competed fiercely for market share in
stock trading, which generates fees and helps banks garner
information about the markets and sell other products to
clients.
Issues of disclosure and whether shares were priced according to
stock-market regulations factored into the regulators'
investigations, the people said.
Dark pools originally were created to help buyers and sellers
swap shares with greater anonymity--and sometimes in greater
size--than they could on the stock market. They also help banks cut
costs because they don't have to pay fees to stock exchanges when
trades are executed in their own dark pools.
Aruna Viswanatha and Christopher M. Matthews contributed to this
article.
Write to Bradley Hope at bradley.hope@wsj.com and Jenny
Strasburg at jenny.strasburg@wsj.com
(END) Dow Jones Newswires
January 31, 2016 14:04 ET (19:04 GMT)
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