Barclays U.S. Dark Pool Trading Falls 33% Amid New York Suit

(Bloomberg) — Barclays Plcs dark pool saw a 33 percent weekly drop in the number of shares traded, suggesting a U.S. lawsuit alleging it misled customers continues to weigh on volumes while threatening revenue at its investment bank.

About 97 million shares were exchanged on the private trading platform in the week of Oct. 20, down from 144 million a week earlier, making Barclays the 14th largest operator, data from the Financial Industry Regulatory Authority show. The volume was 129 million in the week of Oct. 6.

Barclays is fighting New York Attorney General Eric Schneidermans allegation it lied to customers and masked the role of high-frequency traders to boost revenue at what used to be Wall Streets second-largest dark pool. The scandal has spilled over into other areas of the investment bank and contributed to a 25 percent decline in equities trading in the third quarter, Finance Director Tushar Morzaria said Oct. 30.

They seem to suggest there had been a significant impact, a knock-on effect to the equities business because of the dark pool issues, said Shailesh Raikundlia, an analyst at Banco Espirito Santo in London with a buy rating on the stock, adding that the banks equities business will probably recover in the fourth quarter. I wouldve thought there would be some pickup in regaining market share, he said.

Barclays shares were little changed at 2:20 p.m. in London. They have dropped 14 percent this year, making them the second- worst performer among Britains five largest banks after Standard Chartered Plc, which slumped 30 percent.

Record Week

Trading volumes in Barclayss dark pool decreased from the highest number of transactions since Schneiderman made his allegations on June 25 in the previous week. The week of Oct. 13 included a sell-off in U.S. equities that pushed the Standard & Poors 500 Index to its biggest intraday plunge since 2011 amid fears over weakening economic data.

Its all to do with volatility, said Raikundlia. While the market turmoil last month helped boost trading in Barclayss dark pool, it has since normalized, he added.

Credit Suisse Group AGs Crossfinder, the U.S.s largest private-trading platform, recorded a 20 percent drop in trades in the week of Oct. 20 from a week earlier. About 466 million shares were exchanged in the week, down from 585 million.

Barclayss dark pool dropped out of the 10 largest U.S. venues in July, surrendering second-place to UBS AG,Finradata show. About 312 million shares were traded in the week of June 23 on Barclayss platform before the New York Attorney General filed his claim.