Credit Suisse, Barclays to Settle 'Dark Pool' Investigations -- 2nd Update

By Bradley Hope and Jenny Strasburg

Credit Suisse Group AG and Barclays PLC are set to agree to pay about $150 million combined to settle investigations by regulators into their "dark pools," according to people familiar with the matter.

The record settlements are with the Securities and Exchange Commission and New York Attorney General. An announcement is expected as early as Monday, the people said.

Representatives of the SEC, Barclays and Credit Suisse declined to comment. The Attorney General's office didn't respond immediately.

The agreements will immediately become the biggest and second-biggest settlements related to dark pools, which are privately run stock-trading venues that have come under greater scrutiny in the past several years. Regulators and other critics have accused dark pools of providing unfair advantages to professional traders at the expense of big institutions.

The biggest settlement thus far is the $20.3 million New York brokerage Investment Technology Group Inc. agreed to pay the SEC in August. ITG admitted wrongdoing in its case.

Under the planned settlement, Credit Suisse will pay a total of about $85 million--$30 million to each the SEC and New York Attorney General and $24.3 million in disgorged profits, the people said.

Barclays is expected to pay about $70 million to settle charges that include those brought in a high-profile fraud case by the New York Attorney General against Barclays in connection with its dark pools in June 2014. In that case, the New York Attorney General alleged Barclays misled clients about the extent of high-frequency trading in its dark pool, called LX.

Both cases center in part on whether the banks misled some clients about how the bank-owned trading venues prioritized certain buy and sell orders, including whether they withheld information that might have led clients to route orders elsewhere, people familiar with the probes said.

Wall Street firms have competed fiercely for market share in stock trading, which generates fees and helps banks garner information about the markets and sell other products to clients.

Issues of disclosure and whether shares were priced according to stock-market regulations factored into the regulators' investigations, the people said.

Dark pools originally were created to help buyers and sellers swap shares with greater anonymity--and sometimes in greater size--than they could on the stock market. They also help banks cut costs because they don't have to pay fees to stock exchanges when trades are executed in their own dark pools.

Aruna Viswanatha and Christopher M. Matthews contributed to this article.

Write to Bradley Hope at bradley.hope@wsj.com and Jenny Strasburg at jenny.strasburg@wsj.com

(END) Dow Jones Newswires

January 31, 2016 13:08 ET (18:08 GMT)

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