Barclays and Credit Suisse have agreed to pay tens of millions of dollars each to settle charges that their so called “dark pool” trading platforms gave unfair advantage to high-speed traders who used them.
The settlement was reached with New York Attorney General Eric Schneiderman and the Securities and Exchange Commission. Barclays agreed to pay $70 million, which Schneiderman said is the largest penalty ever levied on a dark pool operator.
Credit Suisse agreed to pay $60 million related to dark pools, and turn over another $24.3 million in improper profits and interest to the SEC related to other violations.
“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,” said Schneiderman.
Dark pools are alternative platforms to trade stocks apart from major exchanges such as the New York Stock Exchange. Schneiderman first brought a case against banks accused of giving high-speed traders an unfair advantage in trading back in 2014.
Schneiderman said Barclays misrepresented how it monitored its dark pool for high-speed predatory trading. The settlement said despite repeatedly telling clients that it used sophisticated tools to monitor for such abuse and ran weekly surveillance reports, Barclays in fact did neither.
The settlement with Credit Suisse charges it with a similar misrepresentation and lack of protections for its traders.
“We are pleased to have resolved these matters with the SEC and the New York Attorney General,” said Credit Suisse spokeswoman Nicole Sharp.
Barclays did not immediately respond to a request for comment.