Today Barclays PLC was handed an additional $150 million penalty by New York regulators and as part of the settlement, fire one of its top traders. The actions comes over allegations that a system intended to block unprofitable foreign exchange trades was used to increase the giant UK bank’s profits at the expense of its clients.
This latest fine, levied by the New York Department of Financial Services (DFS), against the bank represents the second time that regulators have gone after Barclays for foreign exchange trading violations. Barclays was a party to a broader, $5.6 billion settlement with the New York Department of Financial Services and U.K. and U.S. law enforcement officials that also saw the five settling bank enter guilty pleas.
This latest penalty brings Barclays total payout to the DFS, for foreign exchange-related violations, to $635 million. As part of the deal with the regulators, Barclays agreed to terminate its Global Head of Electronic Fixed Income, Currencies, and Commodities Automated Flow Trading for misconduct in the bank’s so-called “Last Look” system that is used to monitor foreign exchange trades.
For its part, Barclays said that the settlement arose from problems and failures within its internal control systems. The bank also said it will continue to cooperate with other ongoing investigations.
According to the DFS, Barclays’ Last Look system put a hold on clients’ foreign exchange orders that lasted milliseconds. During that period, Barclays personnel could review the trade to see if the price a customer sought to pay swung beyond a certain range.
DFS said the Last Look system was intended to block toxic order flow and prevent customers from getting involved in unprofitable foreign exchange trades. But in certain instances, from 2009 through 2014, the Last Look system was used to block trades that became unprofitable for Barclays when the price swung beyond a certain range set by the bank.
In those instances, the bank would cancel trades with little or no explanation. This lead to customer complaints and subsequent, documented efforts on the part of bank employees to stonewall customers so as to avoid explaining what really happened.
The DFS said that Barclays took steps last fall to clean up the last look system and that the system now has appropriate filters in place to avoid the problems that had previously occurred.
The experienced securities fraud attorneys at Colling Gilbert Wright & Carter represent investors in the Commodities Futures Trading Commission (CFTC) and the National Futures Association (NFA). If you have lost money as a result of an investment in foreign currencies or other commodities, please contact us for a free case evaluation