NY Court approves $27m settlement in Barclays dark pool case

Maria Nikolova

There will be a hearing in May to further consider the fairness of the terms of the settlement.

Judge Victor Marrero of the New York Southern District Court has signed an Order preliminarily approving the proposed $27 million settlement in a dark pool case targeting Barclays PLC (LON:BARC), its United States subsidiary Barclays Capital Inc. and William White, former Head of Equities Electronic Trading at Barclays Capital.

On Monday, February 4, 2019, the Court approved the Settlement, subject to further consideration at a Settlement Hearing to be held on May 31, 2019 at the United States District Court for the Southern District of New York. This hearing will determine:

  • whether the proposed Settlement of the Litigation on the terms and conditions provided for in the Stipulation is fair, reasonable, and adequate to the Class and should be approved by the Court;
  • whether a Judgment as provided in the Stipulation should be entered;
  • whether the proposed Plan of Allocation is fair, reasonable, and adequate to the Class and should be approved;
  • the amount of fees and expenses that should be awarded to Lead Counsel; and
  • the compensatory awards that should be granted to the Class Representatives.

Not later than February 25, 2019, or 21 calendar days after the Court signs and enters this Order, the Claims Administrator is set to commence mailing the Notice and the Proof of Claim, by First-Class Mail to all potential Class Members who or which can be identified with reasonable effort, and to be posted on its website at www.Barclayslxsecuritieslitigation.com.

The agreement has been reached by Class Representatives Joseph Waggoner and Mohit Sahni on behalf of themselves and each of the Class Members, and defendants Barclays PLC and Barclays Capital Inc. and William White. The Stipulation is intended to fully, finally, and forever resolve, discharge, and settle the released Claims, subject to the approval of the Court.

Let’s recall that, an initial complaint was filed by Barbara Strougo on July 28, 2014. This complaint has been subsequently amended. Thus, Second Amended Complaint alleges that during the Class Period, Barclays issued misstatements concerning the operation of its dark pool, known as Barclays’ Liquidity Cross or LX. More particularly, the Complaint alleges that Barclays continuously misled investors by touting LX as a safe trading venue “built on transparency,” with “built in safeguards to manage toxicity of aggressive traders” who could victimize other dark pool investors by trading ahead of anticipated purchase and sell orders, thereby rapidly capitalizing on proprietary information regarding trading patterns.

The Complaint also says that Barclays touted its Liquidity Profiling tool, which Mr White (who managed the business unit that operated LX) described, as “a sophisticated surveillance framework that protects clients from predatory trading activity in LX.”

The Complaint further alleges that Barclays failed to disclose that it did not in fact effectively protect LX clients from predatory trading with Liquidity Profiling partly because Barclays applied manual overrides to move “aggressive” clients to more “passive” categories, failed to police LX to prevent/punish toxic trading, intentionally altered marketing materials to omit reference to the largest predatory high frequency trader in LX, preferentially routed dark orders to LX where those orders rested for two seconds seeking a “fill” vulnerable to toxic traders, and did not include the NYSE and EDGX direct feeds to construct the national best bid and best offer (“NBBO”) used to update the prices of orders resting in LX.

According to the Complaint, investors learned the truth on June 25, 2014, when the New York State Office of the Attorney General commenced a lawsuit against Barclays over misrepresentations regarding the operation of LX. The Complaint alleges that after the announcement of the NYAG’s action, Barclays’ ADS fell 7.38% on June 26, 2014.

Under the terms of the proposed settlement, Barclays shall pay the Settlement Amount of $27 million on behalf of all Defendants and Dismissed Defendants. Such amount is paid as consideration for full and complete settlement of all Released Claims.

Neither the Settlement nor any of the terms of this Stipulation shall constitute an admission or finding of any fault, liability, wrongdoing, or damage whatsoever, or any infirmity in the defenses that Defendants have, or could have, asserted in the Litigation.

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