Another financial bigwig
Credit Suisse Group AG
) - one of the largest dark pool operators in the U.S. - came under
the regulatory scanner. The company revealed that it is facing
investigations regarding its private trading platform by several
government and regulatory bodies. The bank did not divulge further
details regarding the investigations.
Dark Pool Trading: Concerns on the Rise
Dark pools are private platforms wherein the secrecy of investors
is guarded well in comparison to public exchanges. The crux of
dark-pool trading is that there is less transparency in trading,
minimizing the market impact. Further, price and volumes of trade
are predetermined and are only revealed after the trade. Owing to
this, such investors reap the advantage of manipulative price
movement and lower transaction costs. Precisely, it allows a
section of investors and traders to gain at the cost of a general
Notably, many dark pools offer access to their trade data to
outsiders including high frequency trading firms. With increasing
competition in the dark pool industry, the technical faults and
issues have heightened the associated risks and raised concerns
over the relationship that the high frequency firms and the dark
The U.S Class Action Suit
Credit Suisse also stands among 30 defendants, including
high-frequency trading firms, securities exchanges and
broker-dealers, against class action filed on Apr 18, 2014 in the
U.S. District Court for the Southern District of New York related
to high frequency trading.
The class action has been brought on behalf of public investors who
traded in the U.S stock market on a registered public stock
exchange or on a U.S. based alternative trading platform since Apr
18, 2009. The defendants are alleged to have violated the federal
securities laws related to market manipulation and insider trading.
Other Global Giants in Dark Pool Probe
Another Swiss banking giant UBS AG (
) revealed in its second- quarter 2014 release that its dark pool
trading activities were under detailed scrutiny. Also, earlier this
week, Germany's Deutsche Bank AG (
) said that it is co-operating with the regulators for similar
Among other holders of the dark pool, last month, a lawsuit has
been filed against U.K. based Barclays PLC (
) by the New York Attorney General Eric Schneiderman, charging it
for faulty practices related to its dark pool.
The Goldman Sachs Group, Inc. (
) has recently been slammed with a fine of $800,000 by the
Financial Industry Regulatory Authority ('FINRA'). The company has
been charged of malpractices related to its dark pool - SIGMA-X.
Heightened investigations and lawsuits surrounding dark pool
trading and high speed trading reflect efforts of the regulators
and the government to bring transparency and stability in the
trading industry and thereby safeguard investors' interest.
On Credit Suisse's part, undoubtedly, any negative outcome of the
investigations might force the company to discontinue or limit such
trading practices, which may result in lower trading revenues. In
fact, it could significantly mar the total revenue. However,
nothing can be certainly said until the extent of company's
involvement in the matter is known.
Credit Suisse currently carries a Zacks Rank #5 (Strong Sell).
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