Credit Suisse, Barclays to Settle 'Dark Pool' Investigations -- 3rd Update

By Bradley Hope and Jenny Strasburg 

Credit Suisse Group AG and Barclays PLC are set to agree to pay $154.3 million combined to settle investigations by regulators into their "dark pools," officials said.

The record settlements are with the Securities and Exchange Commission and New York Attorney General. A news conference is scheduled for Monday.

"These cases mark the first major victory in the fight against fraud in dark-pool trading that began when we first sued Barclays: coordinated and aggressive government action, admissions of wrongdoing, and meaningful reforms to protect investors from predatory, high-frequency traders," said Eric T. Schneiderman, the New York Attorney General, in a statement issued after The Wall Street Journal published a report about the planned announcement.

"We will continue to take the fight to those who aim to rig the system and those who look the other way."

Representatives of the SEC, Barclays and Credit Suisse declined to comment.

The agreements are the biggest and second-biggest settlements related to dark pools, which are privately run stock-trading venues that have come under greater scrutiny in the past several years. Regulators and other critics have accused dark pools of providing unfair advantages to professional traders at the expense of big institutions.

The biggest settlement thus far is the $20.3 million New York brokerage Investment Technology Group Inc. agreed to pay the SEC in August. ITG admitted wrongdoing in its case.

Both banks made "false statements and omissions in connection with the marketing of their respective dark pools and other high-speed electronic equities trading services," the New York Attorney General said in his press release.

Under the settlement, Credit Suisse will pay a total of about $85 million--$30 million to each of the SEC and New York Attorney General and $24.3 million in disgorged profits.

The settlement comes less than a month after Daniel Mathisson, Credit Suisse's U.S. head of stock trading, said he was leaving the firm. His group oversaw the bank's dark pools.

Barclays will pay about $70 million to settle charges that include those brought in a high-profile fraud case by the New York Attorney General against Barclays in connection with its dark pools in June 2014. In that case, the New York Attorney General alleged Barclays misled clients about the extent of high-frequency trading in its dark pool, called LX.

Barclays admitted to misleading investors and violating securities laws, and agreed to have an independent monitor review operations of its electronic-trading division, according to the New York Attorney General.

Both cases center in part on whether the banks misled some clients about how the bank-owned trading venues prioritized certain buy and sell orders, including whether they withheld information that might have led clients to route orders elsewhere, people familiar with the probes said.

Wall Street firms have competed fiercely for market share in stock trading, which generates fees and helps banks garner information about the markets and sell other products to clients.

Issues of disclosure and whether shares were priced according to stock-market regulations factored into the regulators' investigations, the people said.

Dark pools originally were created to help buyers and sellers swap shares with greater anonymity--and sometimes in greater size--than they could on the stock market. They also help banks cut costs because they don't have to pay fees to stock exchanges when trades are executed in their own dark pools.

Aruna Viswanatha and Christopher M. Matthews contributed to this article.

Write to Bradley Hope at [e-mail] and Jenny Strasburg at [e-mail]

(END) Dow Jones Newswires

January 31, 2016 14:04 ET (19:04 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.