Deutsche Bank to pay $10.3M for swap data reporting, spoofing practices
Deutsche Bank will pay a total of $10.3 million to resolve
two separate settlements with the Commodity Futures Trading Commission, the
agency announced on June 18.
In the first matter, Deutsche Bank must pay a $9 million
civil penalty to resolve federal court charges for alleged violations of
various swap data reporting and other regulatory violations. In the second
matter, Deutsche Bank Securities must pay a $1.25 million civil penalty for
engaging in spoofing practices through two of its traders.
“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.”
In the Deutsche Bank case, District Judge William Pauley of
the U.S. District Court for the Southern District of New York entered a consent
order settling the CFTC’s case against Deutsche Bank for “numerous swap data
reporting requirements, failures related to supervision of its business
continuity and disaster recovery plan, and violations of a 2015 CFTC order,”
the CFTC said.
The $9 million civil penalty against Deutsche Bank
represents a substantial reduction “based on Deutsche Bank’s cooperation with
CFTC staff, which included consenting to a court-appointed monitor upon the
filing of the action,” the CFTC said. The consent order further requires
Deutsche Bank to comply with the prior CFTC order and prohibits Deutsche Bank
from committing future violations of the sections of the Commodity Exchange Act
and Commission regulations that Deutsche Bank was found to have violated.
The consent order is the result of a complaint filed in
August 2016, following “an unprecedented swap reporting platform outage at
Deutsche Bank that began on April 16, 2016. For the next five days, Deutsche
Bank was unable to report any swap data for multiple asset classes,” according
to the CFTC. The consent order says Deutsche Bank’s efforts to end the system
outage exacerbated existing reporting problems and led to the creation of new
reporting problems, many of which violated the 2015 order.
Given the breadth of the failures regarding Deutsche Bank’s
swap data reporting, supervision, and disaster recovery plan, the CFTC
requested and Deutsche Bank consented to the appointment of a monitor to
facilitate its compliance with its swap data reporting obligations. The consent
order finds that for more than two years of the litigation monitorship, the
monitor made—and Deutsche Bank implemented—numerous recommendations to
remediate issues with Deutsche Bank’s swap data reporting, supervision, and
disaster recovery plan.
Deutsche Bank Securities
In the administrative order filing and settling charges
issued against Deutsche Bank Securities, the CFTC found that, from at least
January 2013 through at least December 2013, Deutsche Bank Securities, by and
through the acts of two Tokyo-based traders, engaged in numerous instances of
spoofing in the Treasury futures and Eurodollar futures contracts on the
Chicago Mercantile Exchange (CME). According to the CFTC, on multiple occasions
during this period, one of the Deutsche Bank Securities traders spoofed in the
Treasury futures market, while the other spoofed in both the Treasury and
Eurodollar futures markets.
“The CFTC is committed to ensuring the integrity of the
marketplace,” McDonald said. “This enforcement action is yet another example of
the CFTC’s commitment to aggressively prosecute conduct that undermines that
integrity.”
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