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"NEW YORK \u2014 British bank Barclays misled large institutional investors and other clients by falsely telling them it was taking measures to protect them from predatory high-frequency traders, New York's attorney general said Wednesday.\nThe allegations against Barclays were contained in a securities fraud lawsuit that Attorney General Eric Schneiderman announced at a Manhattan news conference.\nSee also: WTF Is HFT? What You Should Know About High-Frequency Trading\nThe complaint, filed in state Supreme Court, portrays \"a flagrant pattern of fraud, deception and dishonesty with Barclays clients and the investing public,\" the attorney general said.\nHigh-frequency trading (HFT) has become a mainstream topic of concern after author Michael Lewis published Flash Boys. HFT uses computers to execute trades in fractions of a second based on complex algorithms in order to take advantage of market conditions.\nIn a statement, Barclays spokesman Mark Lane said the bank was cooperating with the attorney general.\n\"We take these allegations very seriously [...] The integrity of the the market is a top priority at Barclays,\" Lane said.\nThe lawsuit alleges Barclays, which has headquarters in London, deceived investors about its dark pool, an electronic trading operation intended to shield them from the high-frequency traders who use sophisticated computer programs to get early access to pending orders and other market-moving information. \nDark pools are private, anonymous trading venues that have become popular destinations for groups that wish to execute large trades without having to worry about issues like high-frequency trading. Many banks operate dark pools, which are not open to the public, as a service to clients. \nBarclays promoted a service it claimed was a \"surveillance\" system that would identify and hold accountable \"toxic,\" ''predatory\" and \"aggressive\" traders, the lawsuit says.\nInstead, the service \"was essentially a sham,\" Schneiderman said. \"Barclays has never prohibited any trader from participating in its dark pool, regardless of how predatory or aggressive its behavior was determined to be.\"\nInformation from former high-level insiders at Barclays and email evidence show that Barclays was determined to raise profits by making its dark pool, referred to internally as The Franchise, the largest on Wall Street, New York authorities said.\nTo help reach that goal, the firm \"disclosed detailed, sensitive information to major high frequency trading firms in order to encourage those firms to increase their activity in Barclays dark pool,\" the complaint says.\nThe lawsuit also accuses the bank of misleading investors by telling them that it would spread orders around to various trading exchanges based on performance. In reality, it says, the bank was routing the vast majority of trades, 75%t, to its dark pool.\nThe complaint says a Barclays executive was instructed to doctor a presentation to an institutional investor by lowering the figure to 35%. The change was made over the executive's protests, and he later resigned, it says.\nThe lawsuit asks the court to order Barclays to halt the behavior and pay unspecified damages.\nAdditional reporting by Mashable"^^<http://www.w3.org/2001/XMLSchema#string>
<http://mashable.com/2014/06/26/new-york-sues-barclays-high-frequency-trading/>