Barclays has been slapped with a $150 million fine by New York state's financial regulator and told to fire an employee over an automated system used to reject unprofitable client orders on its electronic foreign exchange trading platform.
Barclays employed a system called 'Last Look' on its FX trading platform which placed a milliseconds-long hold period between a client placing an order and it being executed by the bank.
The delay was designed to be a defensive bulwark against high-frequency traders using their more nimble systems to outflank market makers like Barclays and acting on price information with "toxic flow" orders.
However, the NYDFS says that for several years, in some instances, Barclays did not bother to distinguish between toxic flow and fair trades that would have been made unprofitable for the bank because of the 'Last Look' hold period.
Not only this, when clients asked why their orders had been rejected, the bank blamed technical issues or offered "vague responses". Emails produced by the watchdog show that the bank's traders and techies were told to "obfuscate and stonewall" on the issue to their own sales colleagues.
In addition to the fine, Barclays has been told to fire an unnamed MD and global head of electronic fixed income, currencies, and commodities automated flow trading.
Anthony Albanese, acting superintendent of financial services, says: "This case highlights the need for greater oversight and action to help prevent the misuse of automated, electronic trading platforms on Wall Street, which is a wider industry issue that requires serious additional scrutiny."