Barclays and Credit Suisse fined over dark pool violations
Barclays Capital and Credit Suisse Securities have been fined a combined $154m (£108m) for their dark pool trading operations.
The fines will be split between the State of New York and US finance watchdog Securities and Exchange Commission (SEC).
Barclays has admitted misleading investors and violating securities law in the way it operated its dark trading venue, LX, and will pay a $70m fine.
Credit Suisse will pay $60m and another $24.3m relating to other violations.
In basic terms dark pool operations allow institutional investors, including hedge funds, to trade large blocks of shares but keep the prices private.
Specifically, the SEC said Barclays failed to continuously police its LX dark pool for predatory trading using the tools it said it would. The bank also did not run weekly surveillance reports.
Credit Suisse, meanwhile, misrepresented that its Crossfinder dark pool used a feature called Alpha Scoring to characterise subscriber order flow monthly in a transparent manner.
In reality the SEC says Alpha Scoring included significant subjective elements, was not transparent, and did not categorise all subscribers on a monthly basis.
“These cases are the most recent in a series of strong SEC enforcement actions involving dark pools and other alternative trading systems,” said SEC chair Mary Jo White. “The SEC will continue to shed light on dark pools to better protect investors.”
“Dark pools have a significant role in today’s equity marketplace, and the firms that run these venues must ensure that they do not make misstatements to subscribers about their material operations,” said Andrew Ceresney, director of the SEC’s enforcement division.
“These largest-ever penalties imposed in SEC cases involving two of the largest ATSs show that firms pay a steep price when they mislead subscribers.”
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