Barclays cleared of conspiring with Wall Street's ‘Flash Boys’

Barclays has been cleared of conspiring with the “flash boy” traders of Wall Street after a US judge dismissed a case brought against it by several American investors, who claimed they lost money through its so-called dark pool.

The judge, Jesse Furman, said while Michael Lewis’s best-seller Flash Boys may have spelt out the supposed dangers of high-frequency trading, that did not provide a case for investors to sue Barclays or the seven financial exchanges in the case.

He dismissed the lawsuit against the UK bank and exchanges including the New York Stock Exchange, Nasdaq and Bats Global Markets.

Dark pools are private markets which allow major investors to trade huge tranches of shares without affecting prices on traditional exchanges.

Flash Boys author Lewis “and the critics of HFT may be right in arguing that it serves no productive purpose and merely allows certain traders to exploit technological inefficiencies in the markets at the expense of other traders”, said Furman.

He added: “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.”

High-frequency trading uses complicated algorithms generated by computers to move rapidly in and out of shares, taking advantage of tiny price differences which exist only for fractions of seconds. In his book, Lewis claimed that high-frequency traders, exchanges and brokers conspired to rig markets and cheat ordinary investors in the New York market.

The pension funds and investors who took legal action against Barclays also claimed it had “perpetrated a manipulative or fraudulent scheme to exploit ordinary investors trading in its dark pool”. The judge dismissed that.