Barclays' shares slump over lawsuit

As much as £3 billion has been wiped off the value of Barclays after the banking giant became the subject of a fraud lawsuit in New York.

New York State Attorney General Eric Schneiderman announcing that he is suing Barclays (AP)
New York State Attorney General Eric Schneiderman announcing that he is suing Barclays (AP)

Barclays said it is taking allegations "very seriously" that it misled large institutional investors in the United States by falsely telling them it was taking measures to protect them from predatory high-frequency traders.

The claims were made on Wednesday in a securities fraud lawsuit announced by New York's attorney general Eric Schneiderman. It was two years ago this week that Barclays paid £ 290 million to settle claims by UK and United States regulators over the manipulation of Libor and Euribor interbank lending.

Shares slumped by as much 8% today - equivalent to more than £3 billion - leaving the stock at its lowest level since the end of 2012.

The lawsuit alleges Barclays deceived investors about its dark pool, an electronic trading operation intended to shield them from the high-frequency traders who use sophisticated computer programmes to get early access to pending orders and other market-moving information.

The bank promoted a service it claimed was a "surveillance" system that would identify and hold accountable "toxic", ''predatory" and "aggressive" traders, the lawsuit says. Instead, the service "was essentially a sham," Mr Schneiderman said.

"Barclays has never prohibited any trader from participating in its dark pool, regardless of how predatory or aggressive its behaviour was determined to be," he added.

The lawsuit asks the court to order Barclays to pay unspecified damages.

The 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.

A Barclays' spokesman said: "We take these allegations very seriously. Barclays has been co-operating with the New York attorney general and the SEC (Securites and Exchange Commission) and has been examining this matter internally. The integrity of the markets is a top priority of Barclays."