Bloomberg News

Barclays Dark Pool, Corporate Tax, Banker Pay: Compliance

July 22, 2014

Barclays Plc (BARC) saw the number of U.S. shares traded in its dark pool decline for a second week after it was sued by New York for allegedly lying to customers.

About 66 million U.S. shares were traded in the dark pool in the week of June 30, down 66 percent from about 197 million in the previous week, according to data from the Financial Industry Regulatory Authority. The drop follows a 37 percent decline from 312 million in the previous week, the data show.

Barclays lied to customers and masked the role of high-frequency traders as it sought to boost revenue at one of Wall Street’s largest private trading venues, New York Attorney General Eric Schneiderman said in a June 25 complaint. Barclays Chief Executive Officer Antony Jenkins, in a memo to staff, said the lawsuit represents “serious charges that allege a grave failure to live up to our values.”

Barclays dropped from second place behind Credit Suisse Group AG (CSGN) as the largest dark-pool operator in the U.S. to 12th, the Finra data show. Credit Suisse, which remains No. 1, saw a 19 percent drop in the number of shares traded in that week.

Barclays has said it’s cooperating with Schneiderman’s office and is examining the matter internally. It didn’t respond to e-mails seeking comment on the Finra report.

Dark pools and high-frequency traders are finding little support among financial professionals amid criticism from books and Congress, responses to a Bloomberg Global Poll show.

Compliance Policy

EU’s Barnier Aims for Norway Agreement on Financial Supervision

European Union Commissioner of Financial Services Michel Barnier aims to reach an agreement with Norway on alignment of its financial industry with EU regulations by the end of September, he told reporters in Oslo.

Barnier is concerned with constitutional restraints in Norway affecting financial supervision. The nation will try to find a solution within its existing framework, Finance Minister Siv Jensen said.

Compliance Action

Police Investigating Danske Bank Rule Out Systemic Misdeeds

Police investigating Danske Bank A/S (DANSKE) on allegations of bond price manipulation said the evidence so far pointed to isolated cases of individual misconduct rather than a broader series of breaches across the bank.

Denmark’s biggest lender said yesterday it found evidence to suggest an employee had passed on insider information, adding a new layer to an investigation that was first made public in February.

Danske said it is cooperating with police in their efforts to find out whether the bank, its mortgage unit and four employees manipulated mortgage bond prices in early 2009. The alleged cases of price rigging were designed to drive prices higher, making client redemptions more costly, public prosecutor Hans Fogtdal said at the time.

The trades in question were made during the darkest hours of the financial crisis, after the 2008 failure of Lehman Brothers Holding Inc. drained markets of liquidity. The bonds at the center of the probe were relatively illiquid notes based on the Copenhagen interbank offered rate, police said in February.

A 2010 study by the Danish central bank that found mortgage bonds to be as liquid as government debt during the crisis excluded 190 smaller mortgage bonds from its analysis.

Interviews/Commentary

Corporate Taxes Are ‘Like a Fire in a Theater,’ Miller Says

The U.S. corporate tax rate of 35 percent is the highest in the world, prompting companies to rush for the exits like people do when there’s a “fire in the theater,” American International Group Inc. (AIG:US) Chairman Steve Miller said yesterday on the “Bloomberg Surveillance” TV program.

Politicians are taking the wrong approach to the problem, Miller said.

For the video, click here.

Comings and Goings/Executive Pay

Most EU Banks to Raise Pay to Offset Bonus Limits, Mercer Says

European banks are set to increase salaries and cash allowances to help retain employees following the introduction of a bonus cap in the region.

About 63 percent of European Union-based lenders will boost base salaries, and 55 percent plan to increase cash allowances, according to a survey by Mercer, a unit of Marsh & McLennan Cos. (MMC:US) That compares with 13 percent and 47 percent, respectively, for lenders outside the region, it said.

The EU agreed to ban banker bonuses of more than twice fixed pay to stop excessive payouts it says spurred irresponsible risk-taking that in turn fueled the 2008 financial crisis.

The U.K. has criticized the cap as harmful to the competitiveness of the nation’s finance industry. Martin Wheatley, chief executive officer of the Financial Conduct Authority, warned that banks are finding ways to sidestep the limit.

About 70 percent of EU-based banks said they will seek shareholder approval of increasing their bonus caps to 200 percent of fixed compensation.

The EU regulations are known as Capital Requirements Directive IV.

Mercer said the executive compensation survey analyzed 78 financial services firms including 44 banks in 18 countries.

To contact the reporter on this story: Carla Main in New York at cmain2@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Charles Carter, Joe Schneider


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Companies Mentioned

  • AIG
    (American International Group Inc)
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  • MMC
    (Marsh & McLennan Cos Inc)
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