Barclays has filed a motion seeking to throw out a lawsuit from the New York Attorney General accusing the bank of deceptively luring unwary investors to a dark pool that was actually being run for the benefit of predatory high-frequency traders.
The suit filed last month by crusading New York Attorney General Eric Schneiderman, claims that Barclays dramatically increased the market share of its dark pool by lying to clients about the level of protection they would receive from high-frequency trading firms.
The complaint alleges that the bank falsified marketing material and client reports to hide the extent and type of high frequency trading in its LX dark pool.
However, in its motion to dismiss it, Barclays says that the complaint "fails to identify any fraud-establishing no material misstatements, no identified victims, and no actual harm".
The bank says that Schneiderman's case ignores that LX customers are "highly sophisticated" traders and asset managers that rely on detailed execution data to decide where to execute their trades, "not on the glossy marketing brochures or quotes from magazine articles the NYAG cites".
In addition, Barclays says that Schneiderman does not even have the authority to bring the case because the Martin Act - on which the claims are predicated -is limited to actions for fraud in the purchase or sale of securities' while the allegations concern only the functioning of LX as an ATS.
Finally, the bank says that the complaint is wrong to seek damages and restitution for the people of the state of New York when it is not alleging that they suffered any harm.
Responding, Schneiderman's communications director Damien LaVera says: "We are confident that a judge will reject this motion and allow us to prove these disturbing allegations in Court."