Citigroup Settles With SEC in Dark Pool Lawsuit

Citigroup has agreed to pay more than $12 million to settle allegations that its Citi Order Routing and Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term (CORE) unit misrepresented its private trading venues, known as dark pools.

As part of the settlement, Citigroup will neither admit nor deny the allegations.

At the heart of the case against Citigroup are allegations that CORE misled investors in the dark pools, saying they would be protected from high-frequency traders.

According to the bank’s marketing materials, customers were supposed to have assurances that high-frequency traders were not allowed to trade in Citi Match, CORE’s premium-priced Dark Pool Dark Pool Private exchanges that are not accessible by the investing public for trading securities are known as dark pools.Dark pools are named due to their lack of transparency and occasional predatory trading practices that are performed by high-frequency traders. These exchanges originally into existence towards the end of the 1980s as a way to better facilitate block trading performed by institutional investors. Why Use Dark Pools?Dark pools are used primarily by large-scale investors who do not seek Private exchanges that are not accessible by the investing public for trading securities are known as dark pools.Dark pools are named due to their lack of transparency and occasional predatory trading practices that are performed by high-frequency traders. These exchanges originally into existence towards the end of the 1980s as a way to better facilitate block trading performed by institutional investors. Why Use Dark Pools?Dark pools are used primarily by large-scale investors who do not seek Read this Term.

Instead, CORE’s system enabled two traders rated as high-speed firms to tap the pool for executing more than $9 billion of orders. It also did not block other HFT traders or keep track of participants in its dark pool, as it said it would.

As a result, traditional traders who thought they were trading only against other traditional traders were, in many cases, facing aggressive high-speed traders.

In addition, Citigroup secretly forwarded and executed nearly half of Citi Match’s orders in other trading venues, including other dark pools and exchanges. The system was supposed to reveal that those orders were executed on an outside venue, but it didn’t and instead sent trade confirmation messages as if the trades were settled in-house.

Dark pools are private electronic trading sites where buyers and sellers are supposed to be able to make trades without being visible to other traders until they are executed. The anonymity of price tags is designed to help institutional investors trade large blocks of shares without the market moving against them.

In recent years, dark pools have attracted increasing scrutiny amid warnings by exchanges and lobby groups about the lack of pre-trade transparency, perceived unfairness, and the potential exploitation of some dark pool users.