Barclays has one less thing to worry about.
On Wednesday, a judge in New York dismissed a series of lawsuits alleging the bank’s so-called dark pool — a private trading system that allows clients to buy and sell shares with less disclosure than the public exchanges — was rigged to give certain traders an edge over others.
The lawsuits were inspired by “Flash Boys,” Michael Lewis’s 2014 bestseller on high frequency trading, a strategy that uses algorithms and high-speed data connections to process lots of trades very quickly. Lewis said this can give them an unfair advantage over less sophisticated traders.
The judge, US District Judge Jesse Furman, didn’t necessarily disagree, but said it wasn’t a matter for the courts in his 51 page opinion (emphasis ours):
Lewis’s book may well highlight inequities in the structure of the Nation’s financial system and the desirability for, or necessity of, reform. For the most part, however, 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.
Barclays wasn’t the lone defendant in the suits. Trading venues operated by the New York Stock Exchange, Nasdaq and Bats Global Markets were also accused of wrong-doing.
Although this might dampen any future civil claims against high frequency trading and dark pools, regulators all around the world are looking into the practice. European regulators are rolling out new rules due to take effect in 2018, known as Mifid II, to try to get a grip on the practice and try and boost transparency.
Investment banks dominate the HFT market according to a survey by the European Securities and Markets Authority last year, making up 61%, while specialised hedge funds account for 24%.
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