Barclays Faces UK Probe Over Dark Pool Trading
Barclays is being investigated by the UK's Financial Conduct Authority (FCA) over its dark pool trading practices.
The FCA is looking into whether Barclays gave certain clients an unfair advantage in its dark pool, a trading venue where investors can buy and sell stocks anonymously.
The investigation is part of a wider crackdown on dark pools by the FCA, which is concerned that they could be used for market abuse.
What is a dark pool?
A dark pool is a private trading venue where investors can buy and sell stocks anonymously.
Dark pools are often used by institutions to trade large blocks of stock without affecting the market price.
What are the concerns about dark pools?
The FCA is concerned that dark pools could be used for market abuse, such as:
- Front-running: This is when a trader buys or sells a stock ahead of a large order that they know is about to be placed, in order to profit from the price movement.
- Quote stuffing: This is when a trader sends a large number of fake orders to a dark pool, in order to create the illusion of liquidity and attract other traders.
- Latency arbitrage: This is when a trader uses a high-speed connection to take advantage of the time it takes for orders to be processed in a dark pool.
The FCA is also concerned that dark pools could be used to manipulate the market price of stocks.
What is the FCA doing about dark pools?
The FCA is taking a number of steps to address the concerns about dark pools, including:
- Increasing transparency: The FCA is requiring dark pools to disclose more information about their trading activity.
- Introducing new rules: The FCA is introducing new rules to prevent market abuse in dark pools.
- Investigating dark pools: The FCA is investigating a number of dark pools, including Barclays.
The FCA's crackdown on dark pools is likely to have a significant impact on the way that these venues are used.
