WASHINGTON (Legal Newsline) —
The Securities and Exchange Commission (SEC) announced Dec. 16 that Deutsche
Bank will settle allegations it misled clients about the performance of a core
feature of its automated order router that primarily sent client orders to dark
“Deutsche Bank claimed to be
using ongoing data analysis to rank the dark pools best suited for customer
orders when, in reality, its system failed to actually do this analysis,” said Andrew Ceresney, director
of the SEC’s Enforcement Division. “When broker-dealers tout their material products and
methodologies, their statements must be accurate.”
According to the SEC,
Deutsche Bank misled consumers about the dark pool ranking model for its
SuperX+ order router. The company used the model to analyze and determine which
venues it would send orders.
Deutsche told consumers the model smartly routes
and selects optimal pools of liquidity for each order. The SEC charged,
however, that Deutsche only updated the ranking model once during a two-year
period, which led to at least two dark pools receiving inflated rankings. This
meant that millions of SuperX+ orders were sent to the wrong venue.
“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.”
Deutsche Bank will pay $18.5 million to the SEC and $18.5 million in a parallel case to the state of New York.