Deutsche Bank, UBS Are Probed Over Dark Pools & High-Frequency Trading, While An Investor Sue Barclays

Deutsche Bank AG (DB) and UBS AG (UBS) have disclosed that they are cooperating with regulators investigating dark pool trading venues and high frequency trading venues. Currently a number of banks are under investigation.

UBS says that among those probing its dark pool operation, which is consider the largest in the U.S. according to trade volume, are the Financial Industry Regulatory Authority, the U.S. Securities and Exchange Commission, and New York Attorney General Eric Schneiderman. The bank says it is one of many defendants named in related class action lawsuits over dark pool trading.

Meantime, Deutsche Bank also says that it too has gotten requests from certain regulators for data about high frequency trading. The bank’s dark pool is known as the SuperX European Broker Crossing System. Deutsche Bank is a defendant in a class action case claiming that high frequency trading may have violated U.S. securities laws.

The Wall Street Journal says that Credit Suisse (CS), another large dark pool operator, hasn’t disclosed that it was specifically asked for information about its trading system. However, its CEO, Brady Dougan, recently told reporters that the bank is “cooperating on a lot of those discussions.”

Dark Pools
Dark pools let investors sell and buy shares anonymously. This allows them to conceal their trading activities from competitors who might otherwise bet against them. Dark pools are where institutional investors can look for big blocks of shares without anyone knowing. This is done to decrease any price impact so as to garner a better deal. Recently, however, regulators have been worrying that the lack of transparency in these trading venues may give some traders an unfair advantage.

As our dark pool fraud law firm has reported before, New York’s attorney general sued Barclays (BARC) PLC . Schneiderman claims the bank showed preference to high-frequency traders in its Barclays LX dark pool while making it seem otherwise.

Barclays is seeking to have the case dismissed. The bank claims that misleading data was used in the complaint. Since the dark pool lawsuit was submitted, several of Barclays’ clients have left and the number of trades in Barclays LX has significantly gone down. A day after Schneiderman sued, Barclays dropped 7.4% in New York trading.

Now, an investor is suing Barclays because of the drop in share prices. The plaintiff, Barbara Strougo, says that she and other Barclays American Depositary share buyers lost funds.

Strougo wants to sue for all the investors that purchased Barclays ADSs from 8/2/11 to 6/25/214. She believes the bank falsified marketing collateral to conceal the extent to which high-frequency traders were active on the dark pool. She is also accusing Barclays of not disclosing that when these traders were purportedly favored over other LX clients, the bank made revenue that was “significant.”

Deutsche Bank, UBS Sucked Into Dark-Pools Trading Probe, The Wall Street Journal, July 30, 2014

Barclays Sued by Investor Over Losses From Dark Pool Suit, Bloomberg, July 28, 2014

U.S. regulators looking into UBS, Deutsche Bank speed trading operations, Reuters, July 29, 2014

More Blog Posts:
Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

Barclays and Deutsche Bank Under Scrutiny Over Barrier Options Transactions, Institutional Investor Securities Blog, July 17, 2014

Investors Pursue UBS’s Puerto Rico Brokerage Over Closed-End Bond Funds, Stockbroker Fraud Blog, July 23, 2014