Barclays and Credit Suisse fined a total of $154 million for dark pool trading operations

Attorney General Eric T. Schneiderman today announced that Barclays Capital Inc. and Credit Suisse Securities (USA) LLC will pay a combined $154.3 million to the State of New York and the SEC to settle investigations into false statements and omissions made in connection with the marketing of their respective dark pools and other high-speed electronic equities trading services. Dark pools are private exchanges for trading securities that are not viewable by the general public and are completed outside of public stock exchanges.

Barclays admitted to core facts set forth in the Attorney General’s Complaint from June 2014 alleging misrepresentations about how it operated its dark pool, “Barclays LX,” including that it misled investors and violated securities laws. Barclays will pay a penalty of $70 million, split equally between the State of New York and the SEC, and will install an independent monitor to ensure proper operation of its electronic trading division.

Credit Suisse will pay a penalty of $60 million split equally between the State of New York and the SEC, and will pay a further $24.3 million in disgorgement and prejudgment interest to the SEC relating to other violations.  The Attorney General and the SEC have both censured Barclays and Credit Suisse for their misconduct.

“These cases mark the first major victory in the fight to combat fraud in dark pool trading and bring meaningful reforms to protect investors from predatory, high-frequency traders,” Attorney General Schneiderman said. “This effort, which began when we first sued Barclays, includes coordinated and aggressive government action which forced admissions of wrongdoing and record fines.  We will continue to take the fight to those who aim to rig the system and those who look the other way.”

In March of 2014, Attorney General Schneiderman called for tougher regulatory oversight and market reforms to eliminate unfair advantages provided to high-frequency traders at trading venues.  In a speech delivered at New York Law School on March 18, 2014, the Attorney General committed to cracking down on “fundamentally unfair and potentially illegal” arrangements that give certain traders early access to market-moving information at the expense of the rest of the market. As part of those efforts, Attorney General Schneiderman launched investigations into Credit Suisse and Barclays, the largest and second largest dark pool operators at the time, in order to expose illegal practices and ensure a level playing field for all investors.

Since that time, the Attorney General has reached agreements with Thomson Reuters, Business Wire, and others to end business practices that provided high frequency traders an unfair advantage.