Deutsche Bank to Pay $205M for Forex Trading Manipulation

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Deutsche BankDB has been imposed a penalty of $205 million by the New York regulator for improper foreign exchange trading activities it conducted in the period between 2008 and 2013.

Lately, Deutsche Bank has been cutting back its failing operations globally with a view to save itself from a serious downturn. However, it still remains exposed to a horde of investigations and legal matters that might dent its financials.


In its investigations, the Department of Financial Services ("DFS") found that the bank's employees had made improper use of online chat rooms where they shared confidential information of clients, thus misleading customers. Further, the bank has been alleged of attempting to manipulate foreign exchange currency prices or benchmark rates.

The DFS stated that through these improper activities, Deutsche Bank's traders were successful in lowering competition in the market, and thus pocketed higher profits.

The regulator also discovered that employees of the German bank were involved in an improper trading practice - jamming the fix - under which they acquired a large trading position by coordinating through multiparty online chat rooms. Thereafter, they used this position to make aggressive trades just before and during the fix window with a motive to move the ultimate fix price in a desired direction.

Deutsche Bank was also found to have used - deliberate underfills - whereby the staff had filed the customer's order fully but held back some of it so as to monitor further price movements. If later on movement in price came in favor of the bank, they split the order, reporting only part of it to the customer and retaining the rest in bank's trading account.

Remedial Measures

Superintendent Maria T. Vullo said, "Inadequate supervision poses serious risks to the safety and soundness of an institution, and compliance failures can help facilitate violations of policies and procedures, harm to customers and other market participants, and possible violations of federal and state criminal and civil laws and regulations, including the New York Banking and Financial Services Laws."

Deutsche Bank has agreed to undertake steps to prevent these improper activities from occurring again. The bank is required to improve supervision regarding compliance with New York State laws and regulations relating to the company's foreign exchange trading business and submit details on how it plans to do the same in written to the DFS.

Similar Settlements

In May 2018, Goldman Sachs GS agreed to pay nearly $110 million to settle allegations that its traders used an electronic chat room to improperly share personal information of clients.

Credit Suisse CS agreed to pay a $135 million fine in November 2017 to settle similar charges put forth by the DFS. Further, Barclays BCS was made to pay $485 million as penalty.

Our Take

Deutsche Bank's bottom line remains under pressure due to a persistently low interest rate environment in the domestic economy. Further, costs related to pending litigation issues might hamper its financials.

In a year's time, the stock has lost 33.8% on the NYSE versus 3.2% growth recorded by the industry .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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