Another potential scandal looming at Barclays

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Barclays is under pressure from US authorities. Photo: Yui Mok/PA Wire/Press Association Images

By Joel Hills, ITV News Business Editor

Another potential scandal looms at Barclays in another story riddled with confusing financial jargon.

Barclays has been charged with "fraud and deceit" by New York's attorney general, Eric Schneiderman. So far so straightforward.

Now, brace yourself.

Eric Schneiderman has accused Barclays of showing a "disturbing disregard for its investors" who traded in the bank's so-called "dark pool."

OK, "dark pools" basically exist as a means of allowing investors to trade anonymously until transactions are complete.

They are "dark" in the sense that information like price and volume of shares traded is not disclosed until a deal is done, unlike on the stock market (a sort of "light pool") where it is updated in public view and in real time.

The major banks have embraced and operate dark pools as they enable institutional investors (some of which manage pension savings) to buy and sell large volumes of shares in a way that would be tricky on the open market without causing the price of a company to leap or even plunge.

New York attorney general Eric Schneiderman accuses the bank of misleading investors. Credit: Reuters

So although dark pools sound rather sinister they have a value.

The New York Attorney General alleges that Barclays made a series of false statements to clients and investors about how its dark pool was operating.

Mr Schneiderman says Barclays reassured institutional investors it was vetting trades to ensure the dark pool was a protected environment - free from predatory traders - while simultaneously permitting "aggressive" high speed trading to take place.

As Mr Schneiderman puts it: "Barclays grew its dark pool by telling investors they were diving into safe waters. According to the lawsuit, Barclays' dark pool was full of predators - there at Barclays' invitation".

Barclays says it is taking the allegations "very seriously" and has 30 days to file a more complete response.

It's interesting to note that the Attorney General says the case against the bank has been "aided significantly by a number of former Barclays employees".

Barclays has already been fined for market abuses relating to LIBOR and the price of gold. The damages sought here are unspecified, Barclays' share price has fallen by more than 5% so far this morning.

Read: Barclays accused of 'dark pool fraud' in US lawsuit