Deutsche Bank’s Penalty Was Substantially Reduced In Recognition of Its Substantial Cooperation and Remediation
Washington, DC – The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Deutsche Bank AG (DB AG) and Deutsche Bank Securities Inc. (DBSI) (collectively, DB), requiring DB to pay a $30 million civil monetary penalty and to undertake remedial relief. The Order finds that from at least February 2008 and continuing through at least September 2014, DB AG, by and through certain precious metals traders (Traders), engaged in a scheme to manipulate the price of precious metals futures contracts by utilizing a variety of manual spoofing techniques with respect to precious metals futures contracts traded on the Commodity Exchange, Inc. (COMEX), and by trading in a manner to trigger customer stop-loss orders.
CFTC’s Director of Enforcement Comments
James McDonald, the CFTC’s Director of Enforcement, commented: “Today’s enforcement action demonstrates that the Commission will aggressively pursue entities that manipulate and spoof in our markets. Further, as a reflection of the Division’s enhanced self-reporting and cooperation program, today’s action shows that the Commission will recognize and give meaningful credit to companies that substantially cooperate in our investigations and proactively undertake remedial efforts. The ultimate goal of the Division’s cooperation program is to enable the Division to identify and hold accountable the individuals responsible for the wrongdoing—and not just the companies that employed them. Today’s actions represent a significant step in that direction.”
According to the Order, the Traders, both individually and in coordination with one or more of the others, placed orders to buy or sell precious metals futures contracts with the intent to cancel the orders before execution. Generally, according to the Order, the Traders placed large bids or offers in the futures market with the intent to cancel before execution (spoof orders) after another smaller bid or offer (resting order) was placed on the opposite side of the same market. According to the Order, the Traders placed their spoof orders with the intent to create the false appearance of market depth, which they knew would and did create the impression of greater buying or selling interest than would have existed otherwise. The Order finds that, in engaging in the misconduct, DB AG, by and through the acts of the Traders, also intended to manipulate, and at times succeeded in manipulating the price of the precious metals futures contracts, and benefitted from the artificial prices caused by the manipulation.
The Order finds further that DBSI failed to perform its supervisory duties diligently. Specifically, the Order finds that while DBSI’s surveillance system identified specific instances of potential misconduct, DBSI did not follow up on the majority of potential instances of misconduct identified by its electronic surveillance system.
In addition, the Order finds that on certain other occasions between December 2009 through February 2012, DB AG, by and through the conduct of one of the Traders in Singapore, placed orders and executed trades to manipulate and attempt to manipulate the price of precious metals futures contracts in order to trigger customers’ stop-loss orders for the benefit of his proprietary trading.
The Order finds that this conduct violated the Commodity Exchange Act and Commission Regulations and, in addition to the $30 million civil monetary, orders DB to cease and desist from further violations and to take specified steps to maintain and implement training programs and systems and controls to detect and deter spoofing by DB personnel. The Order recognizes that DB substantially cooperated in the investigation and proactively took remedial steps. As a result, the civil monetary penalty imposed by the Commission has been substantially reduced.
The CFTC thanks and acknowledges the assistance of the U.S. Department of Justice, the Federal Bureau of Investigation, the Chicago Mercantile Exchange, Inc. and the UK Financial Conduct Authority.
This case is brought in connection with the CFTC Division of Enforcement’s Spoofing Task Force, and the staff members responsible for this case are Katie Rasor, Lara Turcik, Neel Chopra, Sam Wasserman, Brandon Wozniak, Alben Weinstein, Patryk J. Chudy, Lenel Hickson, Jr., and Manal M. Sultan.
Last Updated: January 30, 2018