Is Barclay's dark pool going dark?

Money managers and brokers are shunning Barclays Plc’s dark pool after allegations the bank lied to clients about whether they would be dealing with high- frequency traders, according to people with knowledge of the matter.

Deutsche Bank AG, Royal Bank of Canada, Sanford C. Bernstein & Co. and Investment Technology Group Inc. are among brokerages that disconnected from the Barclays LX venue, said the people, who asked not to be identified because the decisions were private. Voya Financial Inc. also stopped sending orders to the dark pool after New York Attorney General Eric Schneiderman’s lawsuit.

“Given the news of the NY Attorney General investigation, we are instructing you effective immediately, to not route any of our Voya IM orders to Barclays LX dark pool or any Barclays venues,” Nanette Buziak, head of trading for Voya Investment Management, told brokers in an e-mail obtained today by Bloomberg News.

New York’s top law-enforcement official accused Barclays of assuring investors they would be protected from high-frequency traders while it simultaneously aided predatory tactics, according to a copy of the complaint released yesterday. The bank’s stock fell 6.5 percent today in London trading to 215 pence.
 

Internal Investigation
 

Barclays is cooperating with regulators and investigating internally, a spokesman, Mark Lane, said in a statement yesterday. “The integrity of the markets is a top priority of Barclays,” he said. Lane declined to comment on trading in the London-based firm’s dark pool today.

Voya, the insurer and asset manager that was previously majority-owned by ING Groep NV, told brokers to cut off the dark pool to protect its investors, according to Dana Ripley, a spokesman for the New York-based company. He said Voya would monitor the situation. Bernstein’s Jonathan Freedman didn’t return messages.

Barclays LX is the second-largest U.S. dark pool, trailing only Credit Suisse Group AG’s Crossfinder, according to data from the Financial Industry Regulatory Authority. Along with misrepresenting who traded there, the bank sent too many orders to its own venue, according to the complaint.

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co., the three largest equity traders among U.S. banks, already didn’t send orders to the dark pool, according to people with knowledge of the firms’ operations who asked to remain anonymous because the routing arrangements aren’t public.

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