Reference no: EM132444138

'Dark Pool' Probes Settled --- Credit Suisse, Barclays will pay combined $154.3 million to close U.S. investigations false Hope, Bradley; Strasburg, Jenny. Wall Street Journal, Eastern edition [New York, N.Y] 01 Feb 2016: C.1.

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Barclays and Credit Suisse each made "false statements and omissions in connection with the marketing of their respective dark pools and other high-speed electronic equities trading services," the New York attorney general said in his news release.

Barclays and Credit Suisse each made "false statements and omissions in connection with the marketing of their respective dark pools and other high-speed electronic equities trading services," the New York attorney general said in his news release.

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Credit Suisse Group AG and Barclays PLC agreed to pay $154.3 million combined to settle investigations by regulators into their "dark pools," officials said.

The record settlements are with the U.S. Securities and Exchange Commission and the New York attorney general. The agencies announced the agreements in news releases Sunday, after The Wall Street Journal published a report about the impending settlements. "These cases mark the first major victory in the fight against fraud in dark-pool trading that began when we first sued Barclays: coordinated and aggressive government action, admissions of wrongdoing, and meaningful reforms to protect investors from predatory, high-frequency traders," said Eric T. Schneiderman, the New York attorney general, in a statement. "We will continue to take the fight to those who aim to rig the system and those who look the other way," he said.

The SEC's enforcement chief, Andrew Ceresney, said in a separate statement said the penalties show "firms pay a steep price when they mislead subscribers." The SEC alleged that Barclays and Credit Suisse repeatedly failed to police their trading venues, gave some clients inaccurate information about the venues and violated SEC rules aimed at ensuring market fairness and accurate pricing of securities.

The SEC "will continue to shed light on dark pools to better protect investors," the agency's chairman, Mary Jo White, said in the statement. A Credit Suisse spokeswoman said the bank was "pleased to have resolved these matters" with the regulators. Barclays said in a statement it was "pleased to have reached agreement" with the regulators. "The agreement will enable us to focus all of our efforts on serving our clients," the bank said.

The agreements are the biggest and second-biggest settlements related to dark pools, which are privately run stock-trading venues that have come under greater scrutiny in the past several years. Regulators and other critics have accused dark pools of providing unfair advantages to professional traders at the expense of big institutions. Previously, the biggest settlement was the $20.3 million that New York brokerage Investment Technology Group Inc. agreed to pay the SEC in August. ITG admitted wrongdoing in its case.

Barclays and Credit Suisse each made "false statements and omissions in connection with the marketing of their respective dark pools and other high-speed electronic equities trading services," the New York attorney general said in his news release. Under the settlement, Credit Suisse will pay a total of nearly $85 million -- $30 million each to the SEC and New York attorney general, plus $24.3 million primarily in disgorged revenue and interest to the SEC.

Credit Suisse neither admitted nor denied the allegations, according to a person familiar with the matter. The bank's two trading venues named in the settlements are Crossfinder, one of the stock market's biggest dark pools; and another, much smaller platform called Light Pool, which displays bids and offers to sell stocks like an exchange does but has other characteristics of a dark pool.

The settlement comes less than a month after Daniel Mathisson, Credit Suisse's U.S. head of stock trading, said he was leaving the firm in late February to start a new business in asset management, The Journal reported in early January. His group oversees the bank's dark pools.

Barclays will pay about $70 million to settle charges that include those brought in a high-profile fraud case by the New York attorney general against Barclays in connection with its dark pools in June 2014. In that case, the New York attorney general alleged Barclays misled clients about the extent of high-frequency trading in its dark pool, called LX.

Barclays admitted to misleading investors and violating securities laws, and agreed to have an independent monitor review operations of its electronic-trading division, according to the statement from the New York attorney general. Half of the amount Barclays is paying will go the SEC and half to the New York attorney general. Both cases center in part on whether the banks misled some clients about how the bank-owned trading venues prioritized certain buy and sell orders, including whether they withheld information that might have led clients to route orders elsewhere.

Credit: By Bradley Hope and Jenny Strasburg

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