Barclays

On July 31, 2014, Bottini & Bottini, Inc. filed a class action complaint against Barclays PLC and Barclays Capital, Inc. (“Barclays”) on behalf of its client, Great Pacific Securities and all others similarly situated, in federal court in Los Angeles. The "Class," which is the group of persons on whose behalf the case is brought, is defined as all persons and entities who were clients of Barclays and whose trades were submitted for potential execution in Barclay’s Liquidity Cross (“LX”) dark pool from January 1, 2011 to the present and were harmed (the “Class”). Plaintiff also asserts certain claims under California law on behalf of those Class members who are California persons (the “Sub-Class”).

The complaint alleges concealment, unfair competition, and false advertising claims against Barclays for making false statements to and concealing material information from clients about its dark pool Alternative Trading System, Liquidity Cross (“LX”). Barclays' LX dark pool is an ATS that was favored by certain traders since trades are not publicly reported until they are executed. The complaint alleges that while Barclays was soliciting aggressive, predatory, high-frequency traders to participate in its dark pools, it represented to its other clients that it had a proprietary system that would protect those clients from the very high-speed, predatory traders that it invited into its dark pool.

The case was later made part of a MDL proceeding in the Southern District of New York, where it was coordinated (but not consolidated) with securities fraud class action complaints filed against both Barclays and other defendants. After the Court there dismissed the other complaints with prejudice, our separate case was transferred back to Los Angeles federal court, where it is currently pending.

On October 19, 2015, we filed a Second Amended Complaint on behalf of Plaintiff and the Class.

Separately, the SEC and N.Y. Attorney General have been investigating Barclays' conduct with respect to the LX dark pool exchange. On January 31, 2016, Barclays agreed to pay $70 million to settle the SEC and N.Y. Attorney General's investigations. A copy of the SEC's January 31, 2016 cease-and-desist order against Barclays is attached below.

In announcing its settlement with Barclays, the SEC stated:
“Dark pools have a significant role in today’s equity marketplace, and the firms that run these venues must ensure that they do not make misstatements to subscribers about their material operations,” said Andrew Ceresney, Director of the SEC’s Enforcement Division. “These largest-ever penalties imposed in SEC cases involving two of the largest ATSs show that firms pay a steep price when they mislead subscribers.”

According to the SEC’s order instituting a settled administrative proceeding against Barclays:

Barclays said that a feature called Liquidity Profiling would “continuously police” order flow in its LX dark pool and that the firm would run “surveillance reports every week” for toxic order flow.
In fact, Barclays did not continuously police LX for predatory trading using the tools it said it would, and it also did not run weekly surveillance reports.
Barclays did not adequately disclose that it sometimes overrode Liquidity Profiling by moving some subscribers from the most aggressive categories to the least aggressive. The result was that subscribers that elected to block trading against aggressive subscribers nonetheless continued to interact with them.
Barclays at times misrepresented the type and number of market data feeds that it used to calculate the National Best Bid and Offer in LX. For example, Barclays represented that it “utilize[d] direct feeds from exchanges to deter latency arbitrage” when in fact Barclays used a combination of direct data feeds and other, slower feeds in the dark pool.
“Barclays misrepresented its efforts to police its dark pool, overrode its surveillance tool, and misled its subscribers about data feeds at the very time that data feeds were an intense topic of interest,” said Robert Cohen, co-chief of the Market Abuse Unit. “Investors deserve fair and equitable markets without this misbehavior.”

For more information about the class action case that Bottini & Bottini filed, and to view a copy of the complaint, click on the "Cases" tab.