Securities Regulation Daily Deutsche Bank settles CFTC spoofing and reporting actions
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Thursday, June 18, 2020

Deutsche Bank settles CFTC spoofing and reporting actions

By Rodney F. Tonkovic, J.D.

Deutsche Bank consents to an order settling a case arising from reporting violations in 2016, and a settled administrative proceeding levies a $1.25 million penalty for spoofing.

Deutsche Bank has agreed to pay over $10 million to settle two CFTC enforcement matters brought against it. Deutsche Bank AG consented to a court order imposing a $9 million civil penalty and resolving charges stemming from violations of swap data reporting violations. A separate administrative order against Deutsche Bank Securities Inc. settles charges that two of its traders engaged in spoofing and imposes a $1,250,000 penalty.

Deutsche Bank AG. First, the district court sitting in Manhattan entered a consent order settling the CFTC's charges that Deutsche Bank AG violated swap data reporting requirements. Filed in August 2016, the complaint alleged that, due to a system outage, Deutsche Bank submitted incomplete and untimely swap data, failed to supervise its employees responsible for swap data reporting, and had an inadequate Business Continuity and Disaster Recovery Plan. In addition, the efforts to end the outage exacerbated existing reporting problems and created new ones that violated a prior settled CFTC order issued in 2015 and fining the company and requiring it to undertake remedial efforts to improve its swaps reporting processes and procedures.

Since the reporting problems were ongoing, Deutsche Bank consented to the appointment of an independent monitor to facilitate compliance with its swap data reporting obligations. The monitor submitted a final report in August 2019 which concluded that the company had met the monitor's recommendations to address its reporting and supervisory issues. The CFTC and Deutsche Bank reached a settlement in principle soon afterwards.

The consent order requires Deutsche Bank to pay a civil money penalty in the amount of nine million dollars. This amount, the order notes, represents a substantial reduction due to Deutsche Bank's cooperation during the investigation, plus its consent to the appointment of the monitor. The company is further required to comply with the terms of the 2015 order and correctly report cancelled trades, correct errors and omissions in previously reported swap data, and appropriately supervise its swap data processes. The order also enjoins Deutsche Bank from violating provisions related to swap data reporting, correcting errors in previously-reported data, and having an adequate business continuity disaster recovery plan.

"This case reaffirms the importance of proper reporting among registered swap dealers," said CFTC Director of Enforcement James McDonald. "The Commission has been charged with monitoring and addressing systemic risks in our swaps markets. We can't fulfill these obligations if we don't have accurate reporting of the swaps dealing activity of our registrants."

Deutsche Bank Securities. The CFTC also issued a settled administrative proceeding against Deutsche Bank Securities Inc. (DBSI) in connection with spoofing by two of its traders. The order finds that from January through December 2013 two Tokyo-based DBSI traders engaged in numerous instances of spoofing Treasury and Eurodollar futures contracts traded on the Chicago Mercantile Exchange. Specifically, the traders would place a small, genuine order and a larger bid or offer on the opposite side that would be cancelled once the genuine orders were filled and before execution.

In addition to a cease and desist order, DBSI will pay a $1,250,000 civil penalty. The order notes that the penalty amount reflects DBSI's cooperation in the investigation. Regarding this action, McDonald said: "This enforcement action is yet another example of the CFTC's commitment to aggressively prosecute conduct that undermines that integrity."

The case is No. 1:16-cv-6544; the release is CFTC Docket No. 20-17.

Attorneys: Amanda Leigh Burks for the CFTC. Chad Eric Silverman (Skadden, Arps, Slate, Meagher & Flom LLP) for Deutsche Bank AG.

Companies: Deutsche Bank AG; Deutsche Bank Securities Inc.

MainStory: TopStory CFTCNews CommodityFutures Derivatives DoddFrankAct Enforcement ExchangesMarketRegulation FinancialIntermediaries FormsFilings RiskManagement Swaps NewYorkNews

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