Financial Settlement with limited set of US clients

Barclays pay $50 million to some clients for Last Look

On 17 February 2016 it was announced that Barclays had agreed a preliminary, all-cash settlement of a class-action lawsuit concerning Last Look with investors led by Axiom Investment Advisors LLC which was disclosed in papers filed in the U.S. District Court in Manhattan.

“Barclays denied the lawsuit has any merit” and “denied wrongdoing” but agreed to settle merely to avoid the costs of litigation.

There was no special treatment of any kind given to Axiom or any US clients on the BARX system in terms of Last Look functionality. They were treated according to the same principles and rules as all the other thousands of clients. Countless US clients received more rejects than Axiom and had a higher reject ratio (the proportion of orders rejected). If the thousands of clients outside the US were included, there would be many times more clients who experienced a ‘stricter’ treatment under Last Look than Axiom. Apparently Barclays did not proactively try to notify or compensate any of these other clients.

These same clients whom Barclays settled with then went on to sue other competitor firms of Barclays including Deutsche Bank. On the 14 February 2017 it was reported that “US judge on Tuesday narrowed but refused to dismiss a lawsuit seeking to save Deutsche Bank AG from being held liable to investors for delaying forex trades to get a ‘last look’. In her decision, US District Judge Lorna Schofield in Manhattan said: “Autobahn’s terms of service were ambiguous as to whether a binding agreement to trade arose when a customer’s trade instruction was executed, permitting Deutsche Bank a last look, or received from the matching algorithm, not permitting a last look.”

In contrast the equivalent relevant section of the Barclays Legal Terms are completely unambiguous on this issue:

“We are not required to act on any Instruction or to execute any transaction pursuant to any Instruction”…“a transaction shall only be binding when we send confirmation of execution to that effect to the Client”

The above facts suggest that Barclays case was much stronger than Deutsche Bank’s. This strongly suggests that Barclays could have won an equivalent attempt to dismiss their identical lawsuit from the same plaintiffs if they had chosen to resist the suit.

On 6th September 2018 at the full hearing the case against Deutsche Bank was completely dismissed. Key quotes from the judgement are:

“The class certification motion is denied as to both putative classes.”

“Given the substantial evidence in the record that many of Deutsche Bank’s clients were aware of the bank’s use of post-receipt price withdrawals, any Express Contract Class member seeking to prove breach of contract would have to show through individualized extrinsic evidence that it had reached an understanding with the bank that post-receipt price checks were prohibited under the SLA the parties signed.”

It seem clear that Deutsche Bank’s lawyers have much better served their shareholders’ interests and their firm’s reputation that Barclays lawyers did.

It is a matter of great interest to Barclays shareholders whether contesting this case which Barclays stated had no merit would have cost anything close to the $50 million plus costs which their decision to settle resulted in. This is aside from the issue of principle at stake – capitulating to a small number of clients in this way is likely to invite further litigation if Barclays develops a reputation as a ‘soft touch’ for any litigious counterparties. Was this decision in the best interests of shareholders or merely in the best interests of Barclays overworked litigation department?