Deutsche Bank reaches $10 million settlement with CFTC over spoofing, platform outage

June 18, 2020.

agreed to pay $10 million to settle allegations of market manipulation known as “spoofing” and data reporting violations brought by the , the agency said Thursday.

Under a consent order issued by a federal judge, the bank will pay monetary penalties and consent to a court-appointed monitor to oversee compliance improvements.

Deutsche Bank was sued by the CFTC in August 2016 over its handling of an “unprecedented” swap reporting platform outage, rendering the bank incapable of reporting any swap data for multiple asset classes for several days, according to the agency. Efforts to end the outage by the bank “exacerbated existing reporting problems and led to the creation of new reporting problems,” the agency said.

The data reporting failures violated terms of a previous settlementwith the bank in 2015 over similar problems, the agency noted.

The agency also accused the bank of violations associated with alleged “spoofing” by two of its traders. Under the practice, traders manually place bids or offers on exchanges with the intent to cancel them before execution in an attempt to manipulate prices.

Deutsche Bank agreed to pay $9 million over the data reporting issues. The CFTC said the amount represents a substantial reduction based on the bank’s cooperation with the agency. 

The bank's securities division also has to pay a penalty of $1.25 million for multiple instances of spoofing in the Treasury futures and Eurodollar futures contracts on the Chicago Mercantile Exchange. The spoofing took place in 2013 through the actions of two Tokyo-based traders, according to the CFTC.

“This case reaffirms the importance of proper reporting among registered swap dealers. 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," said CFTC Director of Enforcement James McDonald.

Deutsche Bank spokesperson Dan Hunter told Fastinform: “As reflected in both the settlement orders, we have taken meaningful steps to enhance our controls and are pleased to put these matters behind us.”

This is not Deutsche Bank's first scrape with regulators this year. In March, the Financial Times reported that the has been keeping a close watch on the bank's anti-money laundering and compliance controls in the U.K., requiring monthly updates from them rather than quarterly. 

In May the Bank of New York criticized Deutsche Bank for unsuccessfully rehabilitating its U.S. operations after years of violations, leadership changes and failed stress tests from the Fed. 

And earlier this month, the New York Times reported that Deutsche Bank is being investigated by the New York Department of Financial Services over its connection to Jeffrey Epstein. The bank lent him money for several years and held a few dozen accounts for him until he died in 2019.

Deutsche Bank is also in the middle of a €7.4 billion ($8.4 billion) global restructuring plan to improve profitability. Last summer, it said it would be closing its global equities sales and trading operations, downsizing its investment banking and cutting 18,000 jobs, or 20% of its workforce. The CFTC settlement is the latest blow for the bank.

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