Deutsche Bank settles for $37 million in case involving automated order router

By Mark Iandolo | Dec 20, 2016

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 pools.


“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.


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