Securities Regulation Daily CFTC charges Deutsche Bank with swap reporting violations
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Thursday, August 18, 2016

CFTC charges Deutsche Bank with swap reporting violations

By Kevin Kulling, J.D.

The CFTC has filed a civil action in federal court against Deutsche Bank AG charging the German global banking and financial services company with failing to report any swap data for multiple asset classes for approximately five days, the result of a system outage. The complaint also alleges that the reporting problems were exacerbated when Deutsche Bank attempted to remedy the situation and discovered new problems, some of which violated a previous CFTC order (CFTC v. Deutsche Bank AG, August 18, 2016).

CFTC charges. In addition to the five day outage, the CFTC alleges that Deutsche Bank submitted incomplete and untimely swap data, failed to supervise its employees responsible for swap data reporting, had an inadequate Business Continuity and Disaster Recovery Plan, and violated a prior CFTC order.

The system outage involved Deutsche Bank’s scheduled update of its regular swap data reporting platform. To run the updates, Deutsche Bank switched from its main platform to its backup platform, the Disaster Recovery Platform, according to the complaint.

After switching to the Disaster Recovery Platform, it was discovered that certain files on that platform were corrupt. At that point, Deutsch Bank switched back to the main platform, but transferred corrupted files to the main platform from the Disaster Recovery Platform. As a result, the corrupted files shut down the reporting of messages for multiple asset classes, the complaint alleged.

On April 21, 2016, Deutsche Bank resumed its swap data reporting after the outage. However, it continued to create and discover new reporting problems, many of which occurred with messages reported for foreign exchange swaps.

The complaint alleges that large volumes of real-time data made available to the public as well as creation and continuation data made available to the Commission, continues to be reported late for certain asset classes during periods of high volume trading.

Prior CFTC order. In September 2015, Deutsche Bank settled a CFTC complaint for failing to properly report its swaps transactions and implement an adequate system to supervise all activities related to compliance with swaps reporting. That settlement was the first enforcement action under a Dodd-Frank requirement for the real-time public reporting of swap transactions and the reporting of swap data to swap data repositories (SDRs).

Deutsche Bank settled that matter and agreed to a fine of $2.5 million and to undertake remedial efforts to improve its swaps reporting processes and procedures.

Remedies sought. In the recent action, the CFTC seeks an order appointing a monitor to ensure compliance with Deutsche Bank’s reporting responsibilities. The proposed monitor will assess and make recommendations regarding swap data reporting activities, including its policies, procedures, infrastructure, and systems, according to the complaint.

The CFTC also seeks an order permanently enjoining Deutsche Bank from violating the prior CFTC order and from violating relevant rules and regulations. The complaint seeks a civil monetary penalty for each violation in the amount of the higher of $140,000 for each violation of the Regulations, or triple the monetary gain to Deutsch Bank for each violation of the Act and the Regulations.

The complaint is No. 1:16-cv-6544.

Attorneys: Richard A. Glaser for the CFTC.

Companies: Deutsche Bank AG

MainStory: TopStory CFTCNews Derivatives Enforcement Swaps NewYorkNews

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