The US Commodity Futures Trading Commission (CFTC) has
closed its investigation into Deutsche Bank’s FX business, the bank revealed in
its Q3 results today.
In May 2015, a number of major banks were fined
more than $5.8 billion for practices relating to alleged collusion and
manipulation of the spot FX market around the 4pm London Fix, by a number of
regulatory authorities, including the CFTC.
Deutsche was not one of the firms named in those settlements,
but remained under investigation by the CFTC for its FX market practices.
But in the German bank’s interim report published today, it
has revealed that on October 19 the CFTC Division of Enforcement issued a
letter stating that the Commission “is not taking any further action at
this time and has closed the [foreign exchange] investigation of Deutsche
Although the CFTC maintains the right to re-open the
investigation at any point in the future, this is certainly good news for
Deutsche, which has traditionally been one of the largest players in the FX
The CFTC has no binding impact on other regulatory and law
enforcement agency investigations regarding Deutsche’s foreign exchange trading
and practices, which remain pending. Relatedly, Deutsche noted in its report
that it has conducted its own internal global review of FX trading and other
aspects of its FX business.
A spokesperson for the CFTC did not immediately respond to
requests to confirm that is has closed the investigation.
There was further good news for Deutsche in today’s results
as the bank reported a third quarter income of €278 million, beating
analysts expectations and standing in stark contrast to the €6 billion loss it
reported in Q3 2015.
Ongoing class actions
However, Deutsche still faces ongoing putative class actions
brought in the US District Court for the Southern District of New York alleging
manipulation of FX rates.
There are four actions now pending, the first of which is a
consolidated action brought on behalf of “a putative class of OTC traders and a
putative class of central-exchange traders”, who allege illegal agreements to
restrain competition with respect to and to manipulate both benchmark rates and
spot rates, particularly the spreads quoted on those spot rates, the bank’s
The consolidated action further alleges that those supposed
conspiracies, in turn, resulted in artificial prices on centralised exchanges
for foreign exchange futures and options. Some of the other banks named in this
class action have already settled to the collective tune of over
A second action tracks the allegations in the consolidated
action and asserts that such purported conduct gave rise to, and resulted in a
breach of, defendants’ fiduciary duties under the US Employment Retirement
Income Security Act (ERISA) of 1974.
third putative class action was filed in the same court on December 21,
2015, by Axiom Investment Advisors, alleging that Deutsche rejected FX orders
placed over electronic trading platforms through the application of a function
referred to as “Last Look” and that these orders were later filled at prices
less favourable to putative class members.
Filed on September 26, 2016, the fourth putative class
action (the “Indirect Purchasers” action) tracks the allegations in the
consolidated action and asserts that such purported conduct injured “indirect
purchasers” of FX instruments.
Deutsche’s motion to dismiss the consolidated action was granted
in part and denied in part on September 20, 2016.
On August 24, 2016, the Court granted defendant’s motion to
dismiss the ERISA action. Plaintiffs in that action have filed a notice of
appeal to the United States Court of Appeals for the Second Circuit. Deutsche’s
motion to dismiss the Last Look action is pending. Deutsche says that it
intends to move to dismiss the Indirect Purchasers action.
Deutsche also has been named as a defendant in two Canadian
class proceedings brought in the provinces of Ontario and Quebec. Filed on
September 10, 2015, these class actions assert factual allegations similar to
those made in the consolidated action in the United States and seek damages
pursuant to the Canadian Competition Act, as well as other causes of action.