Barclays PLC was slapped with additional $150 million penalty by NY regulators on Wednesday and forced to fire one of its top traders over allegations that a system meant to block unprofitable foreign exchange trades was used to boost the bank’s profits at the expense of clients.
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But the lender did not disclose to clients that the trades were being rejected, but instead cited technical issues or gave vague responses, NY regulators said.
The latest related to Barclays’ electronic trading platform for foreign exchange and follows the $485m that the bank agreed to pay the authority in May over manipulation of forex spot trading.
Barclays imposed a “hold period” – lasting just milliseconds – between receiving a order from the customer and processing it. If there was a suspicious movement in this time then Barclays could block the order. The eFICC head was terminated after the agency completed its FX trading investigation. A number of customers questioned why trades had been rejected. When a trade was rejected, the bank’s clients received a simple message, “NACK”, which stood for “not acknowledged”.
A spokesman for Barclays declined to comment for this story.
The civil penalty will be reflected in Barclays’ Q4 results. “DO NOT talk about P&L on trades”. Moody’s calculated that 15 major banks had set aside £144bn to pay legal costs and settle fines and compensation since the onset of the 2008 banking crisis.
A Barclays sales employee emailed a BARX support system colleague in September 2014 asking about the built-in delay in the last look system. “If you get enquiries just obfuscate and stonewall”, the email said, according to the order.
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The regulator said Barclays revised the “Last Look” trading system at the centre of the misconduct last autumn after it began its probe – but a small portion of its trades continued under the unrevised version until August this year.
