Banks abandon Barclays trading system

Barclays faces a major new threat to its reputation after leading banks abandoned its “dark pool” share trading system following a lawsuit in New York over alleged “fraud and deceit”.

Shares in Britain’s third biggest bank dropped heavily yesterday in the wake of the legal move by New York state attorney general Eric Schneiderman.

Today it emerged that Deutsche Bank, Credit Suisse and Royal Bank of Scotland have all withdrawn from the Barclays LX dark pool.

Schneiderman accused Barclays of misleading clients about the level of protection they would have in the pool, which allows investors to trade large blocks of shares anonymously with prices revealed publicly only after deals are done. The attorney general said: “Barclays grew its dark pool by telling investors they were diving into safe waters. According to the lawsuit, Barclays’s dark pool was full of predators.”

Barclays chief Antony Jenkins has launched a probe and sent an email to staff, warning: “I will not tolerate any circumstances in which our clients are lied to or misled.”