Deutsche Bank and UBS have joined the list of banks involved in an investigation into dark pools and high-frequency trading (HFT), the firms have disclosed.
The banks join Barclays, Credit Suisse and others in receiving inquiries from US authorities in an expanding probe into allegations that dark pools and HFT favored some firms at the expense of others.
UBS, the world’s largest dark-pool operator, says it is responding to inquiries from the SEC, the Financial Industry Regulatory Authority and the New York Attorney General into its alternative trading system, also known as a dark pool, and its securities order-routing and execution practices.
‘UBS is among dozens of defendants, including broker-dealers, trading exchanges, HFT firms and dark pool sponsors, named in putative class actions pending in New York federal court,’ the bank says in its second quarter earnings statement. ‘The lawsuits allege principally that the defendants’ equities order-handling practices favored HFT firms at the expense of other market participants.’
UBS says it is helping authorities with the probe, which ‒ besides the dark-pool activity ‒ includes ‘certain order types and disclosure practices that were discontinued two years ago’.
Deutsche Bank, also in its second quarter earnings communications, tells investors it is responding to regulators’ questions about HFT operations and reveals it is named in a class action complaint related to alleged securities laws violations.
The Financial Times, citing unidentified sources ‘close to the situation’, reports that Deutsche Bank has also launched an internal investigation into its alternative trading system, which is the sixth-largest in the world.
New York Attorney General Eric Schneiderman last week announced a suit against Barclays, alleging that the bank favored high-frequency traders in its dark pool and lied to clients about their involvement in dark pool trading. Barclays contests the claims.
