Barclays, Credit Suisse Acquiesce to SEC Dark Pool Settlements

Barclays and Credit Suisse agree to pay $70 million and $84.3 million, respectively, to settle cases of misrepresentation of dark pool operations.

The fines handed out to Barclays and Credit Suisse are the largest imposed in SEC cases.

Barclays and Credit Suisse have both agreed to settle charges from the US Securities and Exchange Commission (SEC) relating to failings in operating their respective dark pools for a collective total of $154 million.

Both Barclays and Credit Suisse were charged with misleading investors over how the banks' respective dark pool trading venues operated. Barclays has agreed to pay $35 million to both the SEC and the New York Attorney General (NYAG), while Credit Suisse will pay $30 million to the SEC, $30 million to the NYAG, and $24.3 million in disgorgement and prejudgment interest to the SEC for a total of $84.3 million.

The SEC's charge against Barclays was focused on the bank's failure to police its dark pool through a feature called "Liquidity Profiling", which was meant to police order flow in its LX dark pool, while the bank ran weekly surveillance for toxic order flow. The SEC found that Barclays neither ran surveillance or used the Liquidity Profiling tool, and also has over-ridden the feature by moving some subscribers from the most aggressive categories to the least aggressive, without informing investors.

"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 SEC's Market Abuse Unit.

Credit Suisse, meanwhile, was charged with misrepresenting that its Crossfinder dark pool utilized a feature called Alpha Scoring to characterize subscriber order flow monthly in an objective and transparent manner.

In its charge, the SEC said that Alpha Scoring included "significant subjective elements, was not transparent, and did not categorize all subscribers on a monthly basis" and that Credit Suisse "misrepresented that it would use Alpha Scoring to identify 'opportunistic' traders and kick them out of its electronic communications network, Light Pool. In fact, Alpha scoring was not used for the first year that Light Pool was operational."

In December last year, three of JPMorgan's Hong Kong-based equities businesses were fined a collective $30 million by the Securities and Futures Commission (SFC) for failing to properly implement its dark pool trading venue.

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