Tag Archives: Barclays

Barclays Toxic Landfill

The lawsuit filed by New York’s top securities regulator against Barclays, alleges that it favoured high-speed traders using its “dark pool” trading venue, while misleading other investors.The 30-page complaint gives examples of what Eric Schneiderman, the state attorney-general, claims were the bank’s practices.

The lawsuit claims that Barclays took advantage of its institutional investor clients, known as “the buy side.”  The complaint quotes a former director as saying: “[T]he way the deal would work is [Barclays] would invite the high frequency firms in. They would trade with the buy side. The buy side would pay the commissions. The high frequency firms would pay basically nothing. They would make their money off of manipulating the price.“Barclays would make their money off the buy side. And the buy side would totally be taken advantage of because they got stuck with the bad trade . . . this happened over and over again.”

It also quotes a former Barclays director as saying: “There was a lot going on in the dark pool that was not in the best interests of clients. The practice of almost ensuring that every counterparty would be a high frequency firm, it seems to me that that wouldn’t be in the best interest of their clients . . . It’s almost like they are building a car and saying it has an airbag and there is no airbag or brakes.”…

The same day Barclays’ then-head of equities sales noted in reference to the analysis that some in the industry viewed Barclays’ dark pool as a “toxic landfill” and so “[i]f we can help ourselves we should[;] it’s in our control”.

The attorney-general alleges the bank’s “Liquidity Profiling” surveillance system failed to protect clients from predatory high-speed trading tactics…“Barclays has never prohibited a single firm from participating in its dark pool, no matter how toxic or predatory its activity was determined to be.”

Excerpts from John Aglionby, Lawsuit alleges Barclays misled dark pool clients, Financial Times, June 26, 2014

Wall Street Manipulation of Energy Markets

The U.S. Federal Energy Regulatory Commission (FERC) is taking on big banks for their questionable energy trade.  The Federal Energy Regulatory Commission has slammed Barclays (pdf) with a demand to pay $470 million in fines for allegedly manipulating electricity markets in the western US to benefit the bank’s financial swap positions from 2006 to 2008.  Messages and email exchanges between Barclays energy traders released earlier this month reflect their efforts to manipulate and cheat their way to profits. What’s more disturbing is the glee the Barclay’s traders took in manipulating the energy markets with a total disregard for the costs to consumers.

The Barclays traders’ own words are damning:

“I totally f**kked with the Palo mrkt today. . . . Was fun. Need to do that more often.”

The attitude expressed doesn’t get much clearer than that.

In another instant message, the same Barclays trader wrote, “I’m gonna try to crap on the NP light and it should drive the SP light lower.”

The response from his colleague: “That is fine.”

Enron’s energy traders could have written the Barclays’ traders’ scripts. Remember Enron traders gloating, “He just f—s California,” and “He steals money from California to the tune of about a million” a day?  Only the traders’ attitudes are more obscene than their language. So saturated in arrogance, the traders had no concern they might get caught — which makes it even better that they did.

Though FERC hasn’t historically had much to do with regulating Wall Street, that is changing. FERC now also is going after JPMorgan Chase (pdf) and Deutsche Bank  (pdf) on similar charges.  The Los Angeles Times reports that JP Morgan’s questionable trades in the power market in 2010 and 2011 may have cost California residents and businesses more than $200 million. The no-holds-barred pursuit of profiteering no matter what laws and regulations are violated or what the cost is to the public has become a hallmark of Wall Street from Enron to Barclays.

While Wall Street may not have gotten the message that Enron-esque conduct is wrong, it’s gratifying to see FERC step up to hold banks accountable using the power from a post-Enron law. The 2005 Energy Policy Act gave FERC the authority to prevent market manipulation in the energy markets.  Not only does FERC have the power to fine companies as much as $1 million a day per violation, but it also has the ultimate weapon: the ability to suspend authorization to sell. JP Morgan knows that FERC is not afraid to flex this muscle.

Just last week, FERC suspended the authorization for a JPMorgan unit, J.P. Morgan Ventures Energy Corp., to sell electricity at market-based rates for six months beginning next April. FERC took this step because it found that JPMorgan had filed “factual misrepresentations” and omitted material information in filing with FERC and in communications with the California Independent System Operator. JPMorgan will be able to offer electricity for sale only at prices based on specified factors, so that utilities can continue to be able to meet demand.  FERC is relatively new to dealing with Wall Street, but it is quickly learning that a strong jolt is necessary to get banks to comply.

The Commodity Futures Trading Commission, which often works side-by-side with FERC, is expected to see similar cases of energy market manipulation as a result of whistleblower information provided to the CFTC’s new whistleblower reward program created under Dodd-Frank. The outcome of the FERC cases against Wall Street could provide a useful roadmap for future whistleblowers.

Excerpt from, Erika Kelton, Barclays’ Traders Show How Much Fun Wall Street Has Manipulating Markets, Forbes, Nov. 20, 2012

Barclays and Qatar: an Unholy Alliance?

U.S. authorities are investigating Barclays  for potentially violating anti-corruption laws during its scramble to raise money from Middle Eastern investors in the early days of the financial crisis.  The probe, being conducted by the Justice Department and the Securities and Exchange Commission, is at an early stage…The U.S. investigation follows a similar probe that British regulators opened earlier this year.

According to people familiar with the probe, it is examining Barclays’ use of middlemen serving as brokers to connect the bank with powerful Middle Eastern interests at a time when the bank was seeking a cash injection from investors in the region.  Barclays disclosed the investigation at the same time it reported a GBP106 million third-quarter loss…The new investigations represent the latest blows to a once-proud British institution. This summer, Barclays paid about $450 million to settle U.S. and British charges that it sought to manipulate benchmark interest rates, sometimes at the behest of top executives. The ensuing political furor led to the abrupt resignations of Barclays’s chairman, chief executive and chief operating officer.

The Justice Department and SEC investigation involves possible violations of the Foreign Corrupt Practices Act, which among other things bars companies with U.S. operations from bribing overseas politicians or corporate executives in order to win business.  In June 2008, as the financial crisis was gaining steam, senior bankers at Barclays persuaded the Qatar Investment Authority and other investors to inject about GBP4.5 billion into the British bank, seeking to erase fears about Barclays’s health. As part of that deal, Barclays hired the Qatar fund to provide “advisory services’ in the Middle East. The bank later disclosed that it was paying about GBP238 million in fees and commissions to Qatar Investment Authority and related entities.

This summer, the U.K.’s Financial Services Authority launched a formal investigation into Barclays’s public disclosures of those arrangements. The probe focused on past and present Barclays executives, including finance chief Chris Lucas, as well as on the manner in which Barclays wooed the Qataris to invest, according to people familiar with the matter.

Excerpts, Barclays Faces U.S. Anti-Corruption Probe, MarketWatch, Oct. 31, 2012