Money managers and brokers are shunning Barclays' dark pool after allegations the bank lied to clients about whether they would be dealing with high-frequency traders, according to people with knowledge of the matter.
A dark pool is a private forum for trading securities that is not openly available to the public.
"Given the news of the NY Attorney General investigation, we are instructing you effective immediately, to not route any of our Voya IM orders to Barclays LX dark pool or any Barclays venues," Nanette Buziak, head of trading for Voya Investment Management, told brokers in an e-mail obtained by Bloomberg News.
New York's top law-enforcement official accused Barclays of assuring investors they would be protected from high-frequency traders while it simultaneously aided predatory tactics, according to a copy of the complaint. The bank's stock fell 6.5% Thursday in London trading.
LX suffered malfunctions amid disconnections Thursday morning in New York, according to a person with direct knowledge of the matter.
Barclays is cooperating with regulators and investigating internally, a spokesman, Mark Lane, said. "The integrity of the markets is a top priority of Barclays," he said.
Voya, the insurer and asset manager that was previously majority-owned by
Barclays LX is the second-largest U.S. dark pool, trailing only