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March 31, 2022updated 01 Apr 2022 5:59am

Barclays shuts new retail structured products sale in US following $15bn trading error

Barclays has suspended the sale of new retail structured products in the US in the aftermath of a $15bn trading error, reported Financial Times.

The bank is being investigated by the US Securities and Exchange Commission (SEC) in connection with the error, which occurred in 2019 but was only found recently.

In the US, the sellers of structured products are bound by the law to register the amount of products they plan to issue. This practice is known as shelf.

Previously, Barclays had a licence that automatically increased the shelf when issuing more products.

According to people familiar with the development, this licence was lifted following a trading scandal. However, the bank continued to function as if the shelf would increase automatically and ended up breaching its limit.

The bank discovered this month that it had exceeded the $20.8bn maximum shelf limit it set in August 2019 by $15.2bn.

Soon after the error was found, the bank halted the issue of new shares in two of its exchange-traded notes in an effort to control the damage.

In the light of the breach, Barclays is expected to make a rescission offer, under which it would buy back affected securities at their original price.

The bank said it will continue to issue exchange-traded notes that were registered before it first breached the shelf in February last year.

Barclays told the publication in a statement: “As we indicated in our announcement on March 28, Barclays Bank intends to file a new automatic shelf registration statement with the SEC as soon as practicable.”

“We are continuing to issue structured products on other issuance programmes, including in Europe and Asia-Pacific, and remain committed to our global structured products business.”

Earlier this week, Barclays said that it would pay investors at least £450m over the ‘clerical error’. The lender also announced a delay in its share buyback plan as a result of the breach.

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