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December 16, 2016

Posted  January 13, 2017

Deutsche Bank will pay $18.5 million in penalties to the SEC and $18.5 million to the New York Attorney General’s Office to settle charges that it misled clients about the performance of a core feature of its automated order router that primarily sent client orders to dark pools.  According to the SEC’s order, Deutsche made materially misleading statements and omissions concerning the Dark Pool Ranking Model feature of one of its order routers, known as SuperX+.  The Model was intended to measure execution quality and liquidity of venues to which it sent orders.  Deutsche used the Model to determine which venues would receive orders and the sequence in which Deutsche would send them.  Deutsche stated that he Model “smartly routes and selects optimal pools of liquidity on an order by order basis.”  But according to the SEC’s order, due to a coding error, Deutsche updated the ranking model just once during a two-year period, causing at least two dark pools to receive inflated rankings and consequently millions of orders that SuperX+ would have sent elsewhere if the system was operating as described.  SEC

Tagged in: Dark Pools, Market Manipulation and Trading Violations, Securities Fraud,