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Old habits die hard as Deutsche Bank fined by Fed for manipulating FX markets via chatrooms

First Published 27th April 2017

Shortly before the Easter weekend, the Federal Reserve announced that it was fining Deutsche Bank 157 million USD for "unsafe and unsound practices" and for a "failure to maintain an adequate Volcker rule compliance program".

The Fed discovered "deficiencies in the firm's oversight and internal controls" as it transpired that traders were still using chatrooms to "communicate with competitors about their trading positions".

The use of chatrooms to manipulate FX rates was one of the hallmarks of the WM/Reuters Fixing scandal, which resulted in fines of over 5 billion USD for the banks involved. After that story emerged in 2013, several banks cracked down on traders' use of messaging services, with Deutsche Bank issuing an outright ban on FX and interest rate traders using multi-party chatrooms.

In addition to improper disclosure of client data, the Fed found that Deutsche "failed to properly undertake certain required analyses concerning its permitted market-making related activities" (this was the Volcker Rule violation). In other words, Deutsche had been illegally engaging in proprietary trading in FX.

There is no indication that any criminal charges will follow, though the Fed's ruling requires Deutsche to cooperate in any investigations of the individuals involved, none of whom were named.