The International derivatives marketplace CME Group has taken disciplinary action against Deutsche Bank AG London Branch (DBAG London) following a trading violation. The move comes after DBAG London reached an offer of settlement with the CME Business Conduct Committee, in which it neither admitted nor denied any rule violation.
CME Group disciplines Deutsche Bank AG London branch for trading violation
The CME panel’s investigation uncovered that on 8th June and 9th June 2022, DBAG London was utilising an automated trading system (ATS). This system executed numerous conflicting buy and sell orders on behalf of a single account across three distinct futures markets: June 2022 New Zealand Dollars Futures (Non-inverted CME FX Link Spreads), Swiss Franc Futures (Inverted CME FX Link Spreads), and Euro FX Futures (Non-Inverted CME FX Link Spreads).
DBAG London’s ATS was designed to consider the basis between related markets, and it adjusted order prices based on the tightening bid-ask spreads in these markets. However, due to minimum tick increments and rounding logic, the ATS entered orders at the same prices, resulting in opposing buy and sell orders that traded against each other within the same DBAG London account.
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The CME panel determined that DBAG London should have reasonably known that this trading behaviour would lead to a wash result, a prohibited practice in derivatives trading. As a result of the settlement offer, the CME panel has ordered DBAG London to pay a fine of $70,000. The disciplinary action takes effect on 11th December 2023.
This incident underscores the importance of adhering to trading rules and maintaining proper oversight of automated trading systems in the financial industry, as failure to do so can result in significant penalties and reputational damage for financial institutions.
