Deutsche Bank Settles With SEC, NYSAG Over Charges of Materially Misleading Statements

Chris Gaetano
Published Date:
Dec 16, 2016

German financial institution Deutsche Bank will pay $37 million to the Securities and Exchange Commission and the New York Attorney general over charges that it made materially misleading statements to clients about the performance of its automated order router. The SEC said that the bank told clients that securities orders would be routed through its SuperX+ program, which it claimed used what it called the Dark Pool Ranking Model. This ranking model was said to be able to determine the best pools of liquidity on an order by order basis. The SEC, however, said this was not the case: due to a coding error, the ranking model was updated only once in a two-year period, which meant that at least two dark pools received inflated rankings, which caused Deutsche Bank to send millions of orders that the program would have otherwise sent elsewhere if it operated the way the bank had described. The SEC also said that the bank sometimes would manually override the automated rankings to assign fill rates based on a subjective judgment that was inconsistent with the venues' actual performance.

“Automated strategies for routing customer orders are a critically important part of the market,” said Robert Cohen, Co-Chief of the Enforcement Division’s Market Abuse Unit.  “Broker-dealer customers expect to be told if a routing program like Deutsche Bank’s does not function properly, relies on stale data, and routes millions of orders contrary to the described methodology.”

Click here to see more of the latest news from the NYSSCPA.