Two major global banks, Barclays PLC and Credit Suisse Group AG, are paying a combined US$154.3 million to settle government investigations that they misled clients about being able to safely trade on their “dark pool” financial exchanges, the US Securities and Exchange Commission (SEC) and the New York Attorney General’s office said on Sunday.
The banks left their customers on these private exchanges vulnerable to “predatory, high-frequency traders” that could intercept and profit off their financial transactions, despite assurances by Barclays and Credit Suisse to the contrary, according to a statement from the New York Attorney General.
Zurich-based Credit Suisse, a major firm on Wall Street, said it was “pleased to have resolved these matters.”
Photo :AP
London-based Barclays, which has extensive operations in the US, said “the agreement will enable us to focus all of our efforts on serving our clients.”
The SEC and New York Attorney General had planned to announce the joint settlement yesterday before it was reported by the Wall Street Journal on Sunday morning.
Dark pools are private exchanges for trading stocks and bonds. Unlike traditional markets with public prices, trades on dark pools are generally confidential, a benefit for companies engaging in large transactions.
The investigations found that high-speed traders could get early access to dark pool trades and gain an unfair advantage.
“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,” SEC Director of Enforcement Andrew Ceresney said.
As part of the settlement, the London-based Barclays admitted that it misled investors and violated securities laws, the statement said.
The bank is to pay US$70 million in penalties to be split evenly between the SEC and New York state, according to the federal and state regulators.
The New York Attorney General’s office said its investigation found that Credit Suisse misrepresented the protections offered to clients on its dark pools. The bank is to pay a US$60 million penalty with half going to New York and the other half to the SEC, which would collect an additional US$24.3 million related to other violations.
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