Bloomberg: “BofA to Pay N.Y. $42 Million Over Electronic Trading Probe”
March 26, 2018
As published by Bloomberg, on March 23, 2018.
Bank of America Corp.’s corporate and investment banking division agreed to pay $42 million to settle a New York state probe into a so-called masking scheme in which it misled clients about who was seeing and filling their orders and who was trading in its dark pool.
The bank began addressing what it describes as a communications issue with its institutional clients around 2013, Bank of America spokesman Bill Halldin said in a statement.
Regulators have been taking a closer look at how brokers make decisions about where to send client orders, with dark pool private trading platforms coming under greater scrutiny in particular. The European Union’s top markets regulator has been clamping down too, banning hundreds of stocks from trading on dark pools just this month in a drive for greater transparency.
In January 2015, UBS Group AG was fined more than $14 million by the U.S. Securities and Exchange Commission for failing to provide adequate information about how its dark pool operated. A year later, Schneiderman reached a $35 million settlement with Barclays Plc, with the bank admitting it violated securities laws and agreeing to install an independent monitor. Credit Suisse Group AG agreed to pay the attorney general $30 million over misrepresentations the bank made to clients about its dark pool, then the biggest in the U.S.
In 2016, Deutsche Bank AG entered into a deal to pay a $37 million fine to settle a state and federal probe for mishandling client orders in its dark pool. Independent broker Investment Technology Group Inc. paid a $20.3 million penalty for allegedly having run a proprietary trading desk that used knowledge of customers’ requests to trade for its own benefit.
Under Friday’s deal, Bank of America Merrill Lynch admitted it inflated claims about the amount of retail orders routed to and executed in its dark pool, called “Instinct X,” according to the statement. The bank’s marketing materials also boasted about its “strategic” and “tactical” trading algorithms used to route client orders on an “order by order” basis, when in reality the company didn’t use such analysis, Schneiderman said.