Barclays on Thursday filed a motion to dismiss a lawsuit that claims the bank misled clients about the extent of high-frequency trading in its Barclays LX dark pool, saying the complaint does not identify any fraud and has “substantial factual errors.”
In the motion to toss out the lawsuit filed June 25 in New York Supreme Court by Eric Schneiderman, the state's attorney general, Barclays said the suit establishes no misstatements, doesn't identify victims and doesn't show any harm that resulted from the alleged actions.
The motion also states Barclays clients are responsible for monitoring the execution of their trades: “The complaint ignores that LX's customers are highly sophisticated traders and asset managers responsible for investing millions or billions of dollars of assets, who execute trades across multiple markets and (automated trading systems), are capable of closely monitoring the quality of execution they receive based on extensive data, and can select from multiples platforms on which to execute their trades based on detailed execution data, not on the glossy marketing brochures or quotes from magazine articles” cited by Mr. Schneiderman's lawsuit.
Barclays claims the Martin Act, a New York state law that gives the attorney general broad powers to fight financial fraud, does not apply to this lawsuit because automated trading systems follow national laws enforced by the SEC.
While Barclays said the suit has factual errors, “unfortunately, at this stage of the litigation, the pleading standards limit Barclays' ability to rebut those factual errors,” the motion states, “but should this litigation proceed to the next stages, Barclays will introduce evidence demonstrating how far off base these allegations are.”
In the lawsuit, Mr. Schneiderman charged Barclays built its dark-pool trading business by making false claims that clients would be protected from high-frequency traders when those traders were actually favored.
“The complaint filed last month … clearly details the allegations that Barclays engaged in a persistent pattern of fraud and deceit, lying to its investors in order to grow its own dark pool,” said a news release on the New York attorney general’s website Thursday morning in response to Barclays’ motion. “We are confident that a judge will reject this motion and allow us to prove these disturbing allegations in court.”
