CFTC fines Deutsche Bank $10m for swaps failure & trade spoofing

Written by Alex Hamilton
19th June 2020

The Commodity Futures Trading Commission (CFTC) has settled two enforcement actions with Deutsche Bank to the tune of $10 million.

Deutsche dragged up for swap failures and spoofing in 2013 and 2016

The actions refer to Deutsche Bank violating swap data reporting regulations, and two traders from Deutsche Bank Securities (DBSI) engaging in spoofing on the Chicago Mercantile Exchange (CME).

The CFTC has ordered Deutsche Bank to pay $9 million, and its securities business a further $1.25 million. The first figure is “a substantial reduction” on the original fine due to cooperation from the Deutsche.

Regulators found issues at the German bank following a complaint filed in August 2016, after “an unprecedented swap reporting platform outage.” For five days the bank was unable to report any swap data for multiple asset classes.

The CFTC requested, and Deutsche Bank consented to, the appointment of a monitor to facilitate its compliance with its swap data reporting obligations.

Regarding the swaps action, CFTC director of enforcement James McDonald says: “This case reaffirms the importance of proper reporting among registered swap dealers.”

He adds: “The Commission has been charged with monitoring and addressing systemic risks in our swaps markets. We can’t fulfil these obligations if we don’t have accurate reporting of the swaps dealing activity of our registrants.”

As for the DBSI traders, both were found to be manually placing bids or offers on the CME throughout 2013 with the intent to cancel those bids or offers before execution.

Spoofing is a disruptive algorithmic trading tactic by which traders fake interest in products on a financial market to affect the supply and demand.

Based in Tokyo, one of the DBSI traders spoofed in the Treasury futures market while the other spoofed in both the Treasury and Eurodollar futures markets.

The order also recognizes Deutsche Bank’s cooperation in the investigation in the form of a reduced civil monetary penalty.

“The CFTC is committed to ensuring the integrity of the marketplace,” adds McDonald. “This enforcement action is yet another example of the CFTC’s commitment to aggressively prosecute conduct that undermines that integrity.”