Credit Suisse hit with $84 million dark pool fine

Credit Suisse is Switzerland's second-largest bank Keystone

United States regulators have fined Swiss bank Credit Suisse for misleading investors that used its so-called “dark pool” platform. Credit Suisse was ordered to hand over $84.3 million (CHF86.2 million), while Britain’s Barclays bank also faced penalties of $70 million.

The two banks are not the first to be sanctioned for the way they operate their secretive trading platforms. Last January, UBS received a $14.4 million fine in a settlement with the US Securities and Exchange Commission (SEC). Deutsche Bank has also faced regulatory questions over its dark pool operations.

Dark pools were set up to allow traders to execute trades anonymously, allowing them to make deals without being tracked and leapfrogged by high frequency traders jumping in ahead of them using faster technology.

The SEC said on MondayExternal link that both Credit Suisse and Barclays misled their dark pool customers about the way they managed their platforms. In some cases, this actually increased the exposure of traders to high frequency attacks – a fact the banks knew about but failed to disclose.

For example, a system that Credit Suisse said would “kick out” opportunistic activity was not even in use in the dark pool’s first year, the SEC said in its filing. The bank also failed to warn investors of a separate programme that alerted high-frequency traders to activities taking place in its dark pool.

Credit Suisse settled by paying a $30 million penalty to the SEC, $30 million to the New York State Attorney General, and $24.3 million in disgorgement and prejudgment interest. The total bill came to $84.3 million. 

“The SEC will continue to shed light on dark pools to better protect investors,” stated SEC chairman Mary Jo White.

“We are pleased to have resolved these matters with the SEC and the New York Attorney General,” said a Credit Suisse spokesman.