According to a recent InvestmentNews article, Bank of America will pay $42 million to the state of New York to settle a probe into a so-called scheme where the firm misled clients about who was seeing and filling their orders and who was trading in its dark pool, called “Instinct X.” Beginning in 2008, Bank of America Merrill Lynch had trading agreements with electronic liquidity providers such as Citadel Securities, Knight Capital and Madoff Securities that were hidden from customers. The bank made its electronic trading services appear safer and more sophisticated than they were. Attorney General Eric Schneiderman stated “the bank systematically concealed from its clients over a five-year period that it was secretly routing its clients’ orders for equity securities to such firms for execution. It used the masking strategy for more than 16 million client orders between 2008 and 2013, representing more than 4 billion traded shares.”
Bank of America is not the first in trouble with regulators. UBS 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 after, Schneiderman reached a $35 million settlement with Barclays Plc, with the bank admitting it violated securities laws and installing an independent monitor. In 2016, Deutsche Bank entered into a settlement to pay $37 million to the state and federal government for mishandling client orders in its dark pool.
Dark pools are private exchanges for trading securities; unlike stock exchanges, dark pools are not accessible by the investing public. They are named so for their lack of transparency, and came about primarily to facilitate block trading by institutional investors, who did not wish to impact the markets with their large orders and consequently obtain adverse prices for their trades. This makes them vulnerable to potential conflicts of interest by their owners and predatory trading practices by some high-frequency traders. This was according to investopedia online. If you suffered losses because of Bank of America’s dark pool practices, please call us today to find out how you can recover your investment losses on a contingency fee basis. We only make money if you recover yours.
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