Legal headwinds continue to haunt Barclays PLC BCS. Within weeks of resolving legal matters pertaining to its past business misconducts, the London-based bank now faces another lawsuit over a similar issue.
As per Reuters, Axiom Investment Advisors LLC, a New York-based investment advisor, has filed a class action lawsuit against Barclays. The lawsuit alleges that rigged foreign exchange (“FX”) trading practices at Barclays had caused substantial damages to Axiom’s trading partners.
Notably, Axiom and other firms, who were counterparties in Barclays’ FX trading, were tricked by Barclays' ‘last look’ feature. The feature, supposed to act as a safeguard for market makers against wide price fluctuations led by the time lag between placing and executing an order in the FX market, was unjustly used by the company.
Barclays had used this feature to automatically reject those client orders, which were deemed unprofitable for the company due to price changes in millisecond-long hold periods. Therefore as per lawsuit, the company was able to make profit at Axiom’s expense.
Moreover, certain allegations in Axiom lawsuit mirror those that were recently resolved through Barclays’ settlement with the New York Department of Financial Services (“NYDFS”). The current lawsuit also accuses the company of not disclosing the feature to its sales staff (similar to the NYDFS settlement).
Despite Barclays revising the ‘last look” feature last year owing to the NYDFS probe, Axiom and its trading partners suffered significant losses from such malpractices.
Though Barclays continues to co-operate with other ongoing probes, we believe that legal headwinds for the company will not end anytime soon. All these are anticipated to adversely impact its financials in the near term.
Currently, Barclays has a Zacks Rank #3 (Hold). Better-ranked foreign banks include National Bank of Canada NTIOF, Westpac Banking Corporation WBK and BBVA Banco Francés S.A. BFR. All these stocks hold a Zacks Rank #2 (Buy).
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