NYAG: Barclays lied to investors

Jun 26, 2014

New York Attorney General Eric Schneiderman file a suit alleging Barclays told investors that it had set up safeguards to protect them from predatory high-frequency traders. But it says Barclays actually catered to those traders.
Credit AP/John Minchillo

Large institutional investors have long been at the mercy of flash traders who use computers to make thousands of trades a second, skimming off tiny bits of profit from pension and retirement accounts. 

For protection fund managers sought out private stock exchanges called dark pools where only certain investors were allowed in. 

Think of them like a fish tank for guppies. 

"What Barclays is accused of is making promises that they would keep sharks out of the pool but were actually sort of inviting the sharks into the pool."

  Craig Pirrong is a professor of finance at the University of Huston. He says dark pools had become a haven for pension and retirement funds.  

But Schneiderman's suit Wednesday calls into question the integrity of all dark pools and invites regulation to what has become a vital component of everyday investing.