JPMorgan Chase head honcho Jamie Dimon might want to send the attorney general a thank-you card.
The Wall Street bank has been the biggest beneficiary among the largest “dark pool” operators after New York AG Eric Schneiderman hit Barclays with a lawsuit last month, alleging the British bank rigged its own trading platform.
JPMorgan’s dark pool — which, like other less-regulated platforms, matches buyers and sellers anonymously — was seventh-largest in the US during the week of June 30, up from 11th place just three weeks before, according to the most recent data from the Financial Industry Regulatory Authority.
Barclays’ biggest platform, LX, fell from second place to 12th during that same period, losing more than 7 percentage points of market share amid the damaging allegations, according to the Finra data.
Dark pools, which have similar features to exchanges like the New York Stock Exchange and Nasdaq but are subject to less oversight, have been under heightened scrutiny by regulators after author Michael Lewis shined a light on the shady world of dark pools in his best-seller “Flash Boys.”
Last month, Schneiderman accused Barclays of misleading investors about the extent of predatory high-frequency traders lurking in its dark pool, making them easy prey.
“Barclays grew its dark pool by telling investors they were diving into safe waters, when in fact it was full of predators who were there at Barclays’ invitation,” he said at a June 25 press conference.
Barclays hasn’t responded to Schneiderman’s lawsuit, and has until July 25 to do so. Mark Lane, a spokesman for the bank, declined to comment on the drop in volume.
Even after the market had time to digest the details of the AG’s lawsuit, Barclays’ LX platform was still more popular than 30 other dark pools, the Finra data show.
“Perhaps some people find comfort in the bank’s response to these types of crises,” Stacey Slaughter, a partner at law firm Robins, Kaplan, Miller & Ciresi. “Either that or there’s someone not paying attention to what’s going on and they don’t know.”
The overall market for dark pool trades hasn’t budged that much since before Schneiderman announced his lawsuit, according to Finra.
While the total number of shares traded fell about 20 percent during the last available week from the week before, the July 4 weekend also cut trading short.