Barclays, Great Pacific Securities disagree over other cases related to LX dark pool

Maria Nikolova

The parties disagree on whether the “City of Providence v. Bats” case may be used to support the plaintiff’s argument against Barclays.

A civil action targeting Barclays Capital, Inc. and Barclays PLC (LON:BARC) over harm done by the way the bank operated and marketed its “Liquidity Cross” dark pool (LX) continues at the the Ninth Circuit U.S. Court of Appeals. The plaintiff-appellant, Great Pacific Securities, seeks a reversal of an order by the United States District Court for the Central District of California which back in December 2016 dismissed the Complaint by the plaintiffs, accusing Barclays of concealment, false advertising, and violations of California’s Unfair Competition Law.

Let’s recall that Plaintiff Great Pacific Securities was a customer of Barclays and submitted trades for execution in Barclays’ LX dark pool, which Barclays marketed as a safe haven for investors seeking to avoid price manipulation caused by predatory high frequency traders (HFTs). Barclays, however, is alleged to have concealed the true extent of aggressive HFT trading in LX, the significant limitations of its safeguards, and manipulations to its trading algorithms to favor LX.

As per recent filings with the Court, the Oral Argument in the case has been scheduled for Friday, April 13, 2018. Accordingly, the parties in the case have been directed to submit the so-called citations of supplemental authorities. These documents have now been filed with the Court.

The documents, seen by FinanceFeeds, reveal that Great Pacific Securities and Barclays disagree over the reference to another case, captioned City of Providence v. BATS Global Markets, Inc., 878 F.3d 36 (2d Cir. 2017) to support Great Pacific Securities’ argument.

The plaintiff-appellant stresses that the United States Judicial Panel on Multidistrict Litigation (JPML) has found that the present action and the City of Providence action “share factual issues arising from allegations that Barclays misrepresented its LX dark pool as a safe haven insulated from HFTs.”

Also, Great Pacific Securities notes that the Second Circuit reversed the dismissal in “City of Providence”, concluding that plaintiffs sufficiently alleged that the exchanges engaged in manipulative acts in violation of federal securities laws and, even though some information was publicly disclosed, “did not publicly disclose the full range or cumulative effect” of such acts.

Barclays, however, has a different view on the matter. It refers to the fact that the “City of Providence” plaintiffs’ claims against Barclays were dismissed, and plaintiffs chose not to appeal that ruling. Accordingly, Barclays was not a party before the Second Circuit, and that Court’s decision therefore did not touch on any claims against Barclays.

In particular, the claims against Barclays—both the “City of Providence” plaintiffs’ claims that were abandoned on appeal and Plaintiff-Appellant’s California-law claims—centered on Barclays-specific statements and Barclays-specific services concerning the operation of Barclays’ dark pool, LX, and were dismissed by the Providence District Court based on different deficiencies specific to those allegations, including failure to plead reliance or any materially false or misleading statements.

Barclays and Great Pacific Securities also clash over the pleading requirement, that is, on whether the pleading standard should be more stringent or not. A heightened pleading requirement requires that plaintiffs include enough facts in their complaint to make it plausible—not merely possible or conceivable—that they will be able to prove facts to support their claims.

Whereas Great Pacific Securities insists that a less stringent pleading standard should apply in the appeal case, Barclays argues that heightened pleading standard applies to fraud-based claims, including those under California’s consumer-protection statutes.

The case is captioned Great Pacific Securities v. Barclays Capital Inc., et al (0:16-cv-56804).

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