London - Barclays has been cleared of conspiring with the “flash boy” traders of Wall Street after a US judge dismissed a case brought against it by several American investors, who claimed they lost money through its so-called dark pool.
The judge, Jesse Furman, said that while the best-selling book Flash Boys, the exposé of high-frequency traders written by Michael Lewis and published last year, may have spelt out the supposed dangers of the practice, that did not provide a case for investors to sue Barclays or the seven financial exchanges in the case.
He dismissed the lawsuit against the UK bank and markets including the New York Stock Exchange and Nasdaq.
Dark pools are private markets where big investors can trade huge tranches of shares without their dealings being flagged by price moves on traditional exchanges.
The judge said Mr Lewis “and the critics of HFT may be right in arguing that it serves no productive purpose and merely allows certain traders to exploit technological inefficiencies in the markets at the expense of other traders”... Lewis's book may well highlight inequities in the structure of the nation's financial system and the desirability for, or necessity of, reform.
“But, for the most part, those questions are not for the courts, but for commentators, private and semi-public entities (including the stock exchanges) and the political branches of government.”
High-frequency trading uses complicated algorithms generated by computers to move rapidly in and out of shares, taking advantage of tiny price differences that exist only for fractions of seconds. Flash Boys claimed high-frequency traders, exchanges and brokers conspired to rig markets and cheat ordinary investors in the New York market.
The pension funds and investors who took legal action against Barclays also claimed it had “perpetrated a manipulative or fraudulent scheme to exploit ordinary investors trading in its dark pool”. The judge dismissed that.
A Barclays spokesman said: “We are pleased with the court's thorough and well-reasoned decision dismissing all the allegations in the complaints concerning Barclays.”
The outcome of the civil case is not, however, expected to have a great bearing on the criminal case brought by New York Attorney General Eric Schneiderman. Barclays has applied for his case to be dismissed, saying it has no merit.
THE INDEPENDENT