Barclays is mounting a vigorous defence against allegations that it defrauded its customers – accusations levelled by the US attorney general last month that sparked a fall in its share price and led to customers withdrawing their business.
The bank, still battling to repair its reputation in the wake of the £290m Libor-rigging scandal in June 2012, has lodged documents in a New York court arguing that the case brought by Eric Schneiderman should be dismissed.
The case concerned Barclays' "dark pool" trading platform and the bank argues many of the allegations were taken out of context. Schneiderman's case, said Barclays, contains "clear and substantial factual errors".
A month ago Schneiderman accused Barclays of "a systematic pattern of fraud and deceit" by allowing the specialist trading system to favour high-frequency traders.
These traders are firms that use complex computer systems to buy and sell huge volumes of stocks in milliseconds to take advantage of often tiny movements in share prices.
Their activities are the focus of a recent bestselling book on Wall Street by author Michael Lewis.
The book – Flash Boys: A Wall Street Revolt – has argued that traders can rig markets by executing their business more quickly than others. In its motion to dismiss the lawsuit, Barclays said the attorney general did not have the authority to accuse the bank of fraud in this instance and had misconstrued parts of its marketing material.
Schneiderman had argued the marketing documents contained a claim that traders channelling business to Barclays' dark pool would be protected from high frequency traders, when this was not the case in reality.
An extract from the marketing document, which Barclays has lodged with the court, includes a chart showing that 9% of its dark pool business is done with "aggressive" traders. The attorney general, however, expects the judge to throw out the Barclays' claim.
"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. We are confident that a judge will reject this motion and allow us to prove these disturbing allegations in court," a spokesman for Schneiderman said.
Until the court filing, Barclays had issued only a brief statement, arguing that the integrity of markets was a "top priority", but had warned it faced a claim for "unspecified monetary damages and injunctive relief", which knocked as much as 9% off its shares on the day after the allegations were made.
The shares have yet to recover, and were trading at 214p – still more than 5% lower than they were before the allegations were made – before the bank filed its defence on Thursday.
On Thursday, a Barclays spokesman said: "Barclays works closely with its regulators in all jurisdictions and will continue to cooperate with the New York attorney general.
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 its rebuttal, Barclays said: "Fundamentally, the complaint fails to identify any fraud – establishing no material misstatements, no identified victims, and no actual harm." The bank added: "The complaint is based on clear and substantial factual errors.
Unfortunately, at this stage of the litigation, the pleading standards limit Barclays' ability to rebut those factual errors – but should this litigation proceed to the next stages, Barclays will introduce evidence demonstrating how far off base these allegations are."
Earlier this week it emerged that Barclays' dark pool had fallen to 12th place – from second – in the league table of such trading platforms, which allow individuals to trade without their identities immediately being revealed.
According to the most recent data, volume in Barclays' dark pool slumped by 79% in the 10 days after the allegations were made.
theguardian.com
The bank, still battling to repair its reputation in the wake of the £290m Libor-rigging scandal in June 2012, has lodged documents in a New York court arguing that the case brought by Eric Schneiderman should be dismissed.
The case concerned Barclays' "dark pool" trading platform and the bank argues many of the allegations were taken out of context. Schneiderman's case, said Barclays, contains "clear and substantial factual errors".
A month ago Schneiderman accused Barclays of "a systematic pattern of fraud and deceit" by allowing the specialist trading system to favour high-frequency traders.
These traders are firms that use complex computer systems to buy and sell huge volumes of stocks in milliseconds to take advantage of often tiny movements in share prices.
Their activities are the focus of a recent bestselling book on Wall Street by author Michael Lewis.
The book – Flash Boys: A Wall Street Revolt – has argued that traders can rig markets by executing their business more quickly than others. In its motion to dismiss the lawsuit, Barclays said the attorney general did not have the authority to accuse the bank of fraud in this instance and had misconstrued parts of its marketing material.
Schneiderman had argued the marketing documents contained a claim that traders channelling business to Barclays' dark pool would be protected from high frequency traders, when this was not the case in reality.
An extract from the marketing document, which Barclays has lodged with the court, includes a chart showing that 9% of its dark pool business is done with "aggressive" traders. The attorney general, however, expects the judge to throw out the Barclays' claim.
"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. We are confident that a judge will reject this motion and allow us to prove these disturbing allegations in court," a spokesman for Schneiderman said.
Until the court filing, Barclays had issued only a brief statement, arguing that the integrity of markets was a "top priority", but had warned it faced a claim for "unspecified monetary damages and injunctive relief", which knocked as much as 9% off its shares on the day after the allegations were made.
The shares have yet to recover, and were trading at 214p – still more than 5% lower than they were before the allegations were made – before the bank filed its defence on Thursday.
On Thursday, a Barclays spokesman said: "Barclays works closely with its regulators in all jurisdictions and will continue to cooperate with the New York attorney general.
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 its rebuttal, Barclays said: "Fundamentally, the complaint fails to identify any fraud – establishing no material misstatements, no identified victims, and no actual harm." The bank added: "The complaint is based on clear and substantial factual errors.
Unfortunately, at this stage of the litigation, the pleading standards limit Barclays' ability to rebut those factual errors – but should this litigation proceed to the next stages, Barclays will introduce evidence demonstrating how far off base these allegations are."
Earlier this week it emerged that Barclays' dark pool had fallen to 12th place – from second – in the league table of such trading platforms, which allow individuals to trade without their identities immediately being revealed.
According to the most recent data, volume in Barclays' dark pool slumped by 79% in the 10 days after the allegations were made.
theguardian.com
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