New York Attorney General Eric Schneiderman again blasted Barclays for allegedly not protecting customers from "high-frequency" traders in its trading venue, despite repeated assurances to clients by the bank that it was doing so.

Schneiderman moved to knock down a key argument in Barclays' motion, that the lawsuit falls outside of the scope and authority of the New York's securities laws, a powerful statue known as the Martin Act.

Schneiderman said the 1921 statue has long co-existed with federal securities regulation and enforcement, and he said that the suggestion in Barclays' motion that federal law should take precedence in matters of securities fraud is misguided.

A spokesman for Barclays said the bank will continue to cooperate with the attorney general, but the complaint is based on clear and substantial factual errors.

"We do not believe that this suit is justified, and we have a duty to our shareholders, clients and colleagues to defend our position," said the spokesman, Mark Lane.

The attorney general also took issue with Barclays' assertion that customers trading in its "dark pool" trading platform were never misled as they were sophisticated investors.

"Conduct that deceives even sophisticated investors is hardly excluded from oversight and enforcement," Schneiderman said.

The complaint, filed in June, alleged that Barclays promised to ensure the best possible price for orders but instead took steps that maximized the bank's profits.

Nearly all trades were executed on its dark pool called LX when better prices might have been obtained if Barclays had sent trades to other stock exchanges or venues, the complaint said.

The lawsuit is the highest profile case yet as U.S. authorities move to make trading more transparent as more and more trades are executed on dark pools and other alternative trading systems where prices are not immediately posted.

Schneiderman repeated previous allegations that representations made by Barclays about its dark pool were false, such as the protections it offered against aggressive high-frequency trading and how it routed client orders.

"Barclays' false assurances are manifested in the theme set forth in its marketing material: 'Protecting clients in the dark,'" the attorney general said.

Barclays has until Oct. 12 to respond, after which the case will go to trial if a settlement isn't reached.

(Reporting by Herbert Lash; Editing by Chris Reese, Steve Orlofsky and Bernard Orr)

By Herbert Lash