regulators looking into UBS, Deutsche Bank speed trading operations
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[July 29, 2014]
FRANKFURT/ZURICH (Reuters) -
Germany's Deutsche Bank and Switzerland's UBS said they were caught
up in an inquiry by U.S. regulators, who are looking into whether
broker-run stock exchanges gave an unfair advantage to
The investment banks, which said on Tuesday that they were
cooperating with inquiries, also faced class action suits that
alleged they violated U.S. securities laws, allowing high-speed
traders to make a profit at the expense of institutional investors,
such as pension funds and insurance companies.
UBS said in its second-quarter earnings report it was responding to
inquiries from U.S. authorities over the operation of its 'dark
Deutsche Bank, which also reported earnings on Tuesday, said it had
received requests for information from certain regulatory
authorities related to high frequency trading but did not give
Dark pools are broker-run trading venues that let investors trade
shares anonymously and only make trading data available afterwards,
reducing the chance of information leaking about trade orders.
The lack of transparency has drawn the scrutiny of regulators,
concerned that brokers and proprietary trading firms that use
aggressive high-frequency trading strategies have an unfair
advantage over other clients.
Barclays is facing allegations in the U.S. that it lied to clients
about its 'dark pool'. The bank has urged the dismissal of the
lawsuit in New York.
Credit Suisse, one of the biggest players in 'dark pools', said last
week it is working with regulators to stamp out potential abuses in
alternative trading exchanges.
Barclays' dark pool, known as LX, is the second most active
alternative trading system in the United States after Credit
Suisse's, according to regulatory data.
UBS said the inquiries came from various U.S. authorities, including
the Securities and Exchange Commission (SEC), the New York Attorney
General and the Financial Industry Regulatory Authority (FINRA),
adding that the regulators were pursuing similar investigations
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"These inquiries include an SEC investigation that began in early
2012 concerning features of UBSís ATS (alternative trading system),
including certain order types and disclosure practices that were
discontinued two years ago," UBS said.
The suits mainly allege that the defendants favored high frequency
trading firms at the expense of other market participants, UBS said,
adding that the litigation was at a very early stage.
Reuters reported earlier this month that the SEC was seeking
information on 10 registered broker dealers as part of an ongoing
investigation into high frequency trading strategies.
The SEC told its staff in late March that it was interested in
seeing any tips, complaints, or referrals that they receive
concerning the brokers and high frequency trading.
(Reporting by Jonathan Gould in Frankfurt, Katharina Bart and Joshua
Franklin in Zurich; editing by Thomas Atkins and Lisa Jucca and
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