Barclays’ dark pool shunned by clients after fraud case

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.

Deutsche Bank, Royal Bank of Canada, Sanford C. Bernstein & Co. and Investment Technology Group Inc. are among brokerages that disconnected from the Barclays LX venue, said the people, who asked not to be identified because the decisions were private. Voya Financial Inc. also stopped sending orders to the dark pool after New York Atty. Gen. Eric Schneiderman sued the bank.

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 ING Groep, told brokers to cut off the dark pool to protect its investors, according to Dana Ripley, a spokesman for the New York-based company. He said Voya would monitor the situation. Bernstein’s Jonathan Freedman didn’t return messages.


Barclays LX is the second-largest U.S. dark pool, trailing only Credit Suisse Group AG’s Crossfinder, according to data from the Financial Industry Regulatory Authority. Along with misrepresenting who traded there, the bank sent too many orders to its own venue, according to the complaint.

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co., the three largest equity traders among U.S. banks, already didn’t send orders to the dark pool, according to people with knowledge of the firms’ operations who asked to remain anonymous because the routing arrangements aren’t public.

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