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What is a dark pool? And what is Barclays accused of?
Q What is a dark pool?
A Dark pools are private exchanges where access to transactions is tightly limited, and information on the trades is not made publicly available.
Q Why would anyone use that? Are they popular?
A They are increasingly popular – around 40 per cent of US equity trades go through dark pools. The advantages for banks which run the pools are that they do not have to pay another exchange fees for transactions, keeping bills down. Customers can benefit by concealing their trades, which is important when buying or selling large amounts of shares.
Q What has Barclays been accused of doing?
A The law suit claims Barclays told investors they would be protected from predatory trading behaviour and high-frequency traders, but that the opposite was true.
Q Did investors not notice this?
A Barclays is accused of presenting false data to investors to fit with the sales pitch rather than reality.
Q What about the staff, did nobody speak up about this?
A It is alleged that one director refused to put false numbers in a presentation. The director was fired.
Q What next?
A Barclays seems to have been taken by surprise here. They have 20 days to decide if they will fight the case or concede something went wrong.