Barclays In New $150m Forex Rigging Penalty

Barclays (LSE: BARC.L - news) is to pay an extra $150m (£99m) penalty to US regulators to settle allegations of foreign exchange rate rigging.

The New York Department of Financial Services (NYDFS) also said the British bank would “terminate” a senior employee - its global head of electronic fixed income, currencies and commodities automated flow trading.

It (Other OTC: ITGL - news) said that Barclays in some instances used its forex system automatically to reject client orders that would be unprofitable for the bank. NYDFS said the bank did not disclose that the trades were being rejected, instead citing "technical problems".

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.

Last Look was designed to protect Barclays from "toxic order flow" from sophisticated electronic trading systems that might profit from being a millisecond ahead of the bank in detecting market movements.

It did this by imposing a delay between receiving an order for a trade and carrying it out to detect whether the price was moving against it so that it might reject the trade.

But the bank did not try to distinguish between so-called "toxic order flow" and instances in which prices simply happened to move in favour of the customer, the regulator said.

"Thus, instead of employing Last Look as a purely defensive measure, Barclays instead used it as a general filter to reject customer orders that Barclays predicted, based on price movements during the hold period, would be unprofitable to the bank," it said.

The NYDFS said that on occasions between 2009 and 2014 certain Barclays employees had provided insufficient information to clients about its use of the Last Look system. A number questioned why trades had been rejected.

The regulator published messages between Barclays staff over the system including one which said: "If you get enquiries just obfuscate and stonewall."

Anthony Albanese, NYDFS acting superintendent of financial services, said: "This case highlights the need for better oversight and action to to help prevent the misuse of automated, electronic trading platforms on Wall Street."

The settlement adds to an earlier rate-rigging penalty announce in May when the bank agreed to pay £1.53bn to US and UK authorities.

It comes as new Barclays boss Jes Staley prepares to take over at the bank in December.

Barclays said the latest penalty would be reflected in its 2015 fourth quarter results. It added: "Barclays continues to co-operate with other ongoing investigations and to manage related litigation risks as previously disclosed."