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Barclays Sued by California Client Over Dark Pool Trading

Aug. 1 (Bloomberg) -- Barclays Plc was sued by a client who claims the bank gave high-frequency traders unfair advantages in another challenge to its dark pool, a private trading venue where investors can trade stocks mostly anonymously.

Great Pacific Securities, a California-based institutional broker-dealer, said Barclays concealed that its practices put clients at a disadvantage and favored predatory traders lurking in the dark pool and skimming information about client trades, according to a complaint filed by Cotchett Pitre & McCarthy LLP.

The identity of predatory traders and the volume of their trading in the London-based bank’s “liquidity cross” dark pool was hidden from clients, according to a copy of a complaint the law firm said it filed in federal court in Santa Ana, California. The broker-dealer sued on behalf of Barclays clients whose trades were part of the liquidity cross pool starting in 2011. The complaint couldn’t immediately be confirmed in electronic court records.

New York Attorney General Eric Schneiderman claimed in a lawsuit filed in June that Barclays falsified marketing materials to hide how much high-frequency traders were buying and selling. Barclays runs one of Wall Street’s largest dark pools.

Schneiderman contends Barclays clients such as institutional investors were the losers, led to believe they were safe in a venue where aggressive trading strategies were in fact encouraged.

The bank asked a federal judge to throw out the New York case, saying it fails to show investors were harmed and is based on factual errors.

The California case is Great Pacific Securities v. Barclays, U.S. District Court, Central District of California (Santa Ana).

To contact the reporter on this story: Karen Gullo in federal court in San Francisco at kgullo@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg, Andrew Dunn

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