The private trading venues are the first to be sanctioned by Schneiderman, who almost two years ago began investigating whether U.S. stock exchanges and Wall Street dark pools provide improper advantages to high-frequency traders. He sued Barclays in June 2014, alleging it lied to customers about what high- frequency trading firms were doing inside its platform in an effort to expand the venue’s business.


Dark Pools


Dark pools sprung up in the 1980s to give market participants the ability to trade big blocks of stock without tipping off other traders. Over the years, they have garnered a greater portion of U.S. equity volume, accounting for almost 20 percent of the amount that changes hands daily. Hosted by some of the world’s biggest banks, dark pools allow traders to keep their offers to buy and sell stocks largely private.

The settlements will effectively establish the New York attorney general as an enforcer in the business of private trading venues, though he had been criticized for wading into the markets arena.  Under the settlement, Barclays is acknowledging that the attorney general had jurisdiction under the Martin Act, a New York law that gives him broad powers to pursue white-collar crime.

For the SEC, the record dark-pool penalties serve as a counterpoint to critics who’ve said it has been lax in overseeing the U.S. equities market. In 2014, an SEC official publicly rebutted criticism that the agency wasn’t doing enough in the era of light-speed trading after the Schneiderman investigation began.

“The SEC will continue to shed light on dark pools to better protect investors,” SEC Chairman Mary Jo White said in the statement detailing the settlement.

The attorney general’s probe of Barclays was sparked by former bank employees who brought the allegations to him, people familiar with the matter said at the time. The SEC opened a parallel investigation.


‘Flash Boys’


The SEC and the Department of Justice also promised a broad inquiry into the fairness of rapid-fire trading after a flurry of attention to Michael Lewis’s “Flash Boys,” which alleged Wall Street firms were gaining an unfair edge by using computers that run hundreds of trades in the blink of an eye.

As part of that effort, White announced plans for greater oversight of stock trading in a June 2014 speech. The high- profile cases to date have focused not on the trading itself, but on disclosures and practices by those who cater to the firms.