Judge Tosses Axiom Last Look Class Action Against Deutsche

A New York judge has thrown out a class action lawsuit led by Axiom Investment Advisors against Deutsche Bank, which claimed the bank abused the practice of last look in its foreign exchange trading.

Judge Lorna Schofield threw out two class actions, arguing that neither satisfied the requirements for a successful class action in that different clients had different experiences and there was no common theme of “unjust enrichment”. She also leans repeatedly on the New York Department of Financial Services report into Deutsche, which at one point notes that the bank “as a general matter” appropriately calibrated its last look settings.

The judge also says that Deutsche Bank provided written disclosures beginning in 2015 discussing the bank’s use of post-receipt price information to evaluate and potentially reject trade requests. “Clients who reviewed or had access to these disclosures and who have since continued to trade with Deutsche Bank will have particular difficulty proving their contract claims,” the judgment states.

Judge Schofield also notes that most clients who were subject to “delayed trade acceptance” (last look) moved their servers next to a Deutsche Bank server in 2012 and then were able to better measure the last look window for their trades and the discuss this with the bank. 

Axiom used Reto Feller, now a FICC expert at Veldor Associates (and also former portfolio manager at BlueCrest Capital Management and head of spot FX trading at Westpac London) as an expert witness and he argued the practice of post-receipt withdrawals (rejections) was not a common industry practice and was outside the guidelines of the Bank of England’s NIPS Code. 

The judge, however, found Feller’s arguments unavailing because “the weight of the evidence contradicts them”. She adds, “He does not cite a single industry publication or other authority suggesting that participants in the FX industry were unaware of liquidity providers’ use of post-receipt price withdrawals, much less universally so.”

The judgment further notes that the NIPS Code also advises market participants that last look’s use is appropriate to “mitigate technological anomalies and latencies”. 

The judgment further states that the record contains “undisputed evidence” that at least some, and perhaps many, of Deutsche Bank’s clients were aware of the bank’s post-receipt price withdrawals and understood the relevant agreements to allow them. “The practice is commonly known in the FX market as a measure to protect against predatory trading strategies by certain sophisticated customers; the practice has been discussed in industry publications since at least late 2006,” it states.

Earlier this year Deutsche settled with the NYDFS over allegations of FX misconduct, but while the authority found there was lax management of certain aspects of the business – specifically around fixes and information sharing (which have both been rectified it added) – the DFS was generally comfortable with Deutsche’s deployment of last look.


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Colin Lambert

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