Barclays Bank and the “Dark Pool”.
Like many other large investment banks Barclays has a “dark pool”. It may have started when Barclays acquired Lehmann Brothers bank in New York when it collapsed. This pool is dark because the deals done in it are secret. Quite how secret is unclear.
Obviously the traders know their own trades. But who buys what , and at what price is not known to the owners of these assets. Nor is it clear which senior managers outside the dark pool, but in the bank, know anything at all.
This pool may have started to facilitate very high levels of trading, at very high speed on computers, with very small profits to the bank on each trade. But the very high volumes of trading still produced handsome profits for the bank. This changed when some few trades for very large sums started in the pool, because the trade could be in secret, and there would be no public knowledge until after the trade was done. This also avoided public stock exchanges in New York.
Some clients objected to this and were assured that it would stop. There is now an investigation by New York lawyers on behalf of the Bank’s customers.
This is especially embarrassing for Barclays as they have a new chief executive who has set up a Compliance Academy, with Cambridge University, to ensure that all employees are aware of compliance issues around the dark pool. So, the bank spends £300 million on compliance; and employs 2,100 people to actively ensure compliance. There are 2 year long classes for graduate recruits; and regional master classes for more senior employees.
The Judge Business School at Cambridge are reported as training Barclays staff in truthfulness and “what is compliance”. The School itself offers classes on the “interface between values and behaviour”; “ways in which the sector responds to acts within the regulatory environment”; and “behaviours and practices of organisations to respond to the need for trust and good conduct”.
All this seems relevant, if vague; and nobody can object to the need for trust and good conduct. Most employees in banks today are already graduates, and some may feel that their university days are behind them. So, it will be interesting to see what long term influence these classes have on behaviour back at the bank. Also, the need for classes trust and good behaviour may strike some as implying that they personally lack these morally desirable values.
Closing down these dark pools, and insisting that all deals are done in public stock exchanges, might be more effective and less costly. But then there is the loss to the bank of a large slice of their total profits. Introducing free in-credit banking for individual current accounts is seen by Barclays Chairman as driving banks to seek income elsewhere! It begins to look like the retail customer is responsible for the darkness of the pool.
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