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Barclays asks judge to dismiss N.Y.’s ‘dark pool’ lawsuit

July 24, 2014, 6:49 PM UTC
The Barclays Plc logo.
The Barclays Plc logo.
Photograph by Simon Dawson/Bloomberg—Getty Images

Barclays is asking a New York state judge to throw out a lawsuit brought last month that accuses the U.K. bank of deceiving investors through the operations of its alternative trading venue, or “dark pool.”

In June, New York State Attorney General Eric Schneiderman hit Barclays with a securities fraud lawsuit, claiming the bank made false statements about how it runs its LX dark pool – one of the country’s largest. Like other dark pools, LX allows participating bidders and sellers to make private stock trades without publishing them for public view.

The state’s lawsuit claims Barclays told its clients it would route their trades through whichever exchange could best execute them, but then actually gave preference to its own dark pool trading venue.

Barclays filed a motion to dismiss the suit in New York State Supreme Court on Thursday, claiming that the state “fails to identify any fraud” in last month’s complaint. The bank argues that Schneiderman’s suit relies “primarily on snippets of marketing brochures and brief quotes in news articles . . .” and that its own customers are “highly sophisticated traders and asset managers” who are capable of determining the quality of Barclays’ services on their own.

“Barclays works closely with its regulators in all jurisdictions and will continue to cooperate with the New York Attorney General,” the bank said in a statement after filing its motion to dismiss the lawsuit. “However, we do not believe that this suit is justified, and we have a duty to our shareholders, clients and staff to defend our position.”

In response to the Barclays filing, Schneiderman issued a statement claiming that his complaint “clearly details the allegations that Barclays engaged in a persistent pattern of fraud and deceit, lying to its investors in order to grow its own dark pool.” He added that he believes the court will reject Barclays’ request to dismiss the suit.

“The Attorney General is committed to ensuring there is one set of rules for everyone in the markets, and will crack down on abuses wherever he sees them,” Schneiderman said in the statement.

Barclays’ shares have suffered of late and dipped almost 10% in the past month.