Deutsche Bank has received a £4.7 million fine from the UK financial regulator after a coding error in its transaction systems led to the inaccurate reporting of millions of equity swaps.
An investigation by the Financial Conduct Authority (FCA) in 2013 revealed that the faulty code resulted in 29.4 million CFD (contract for difference) equity swaps being recorded as 'sell' rather than 'buy' in transaction reports. The swaps were executed between November 2007 and April 2013.
The FCA uses transaction reports to detect and investigate suspected market abuse, insider trading and market manipulation, gathering information on details such as the product traded, the buyer and seller's identity, the price and the quantity concerned.
Although there was no loss to consumers or investors, the FCA said that the coding error could have had a "serious impact" on the FCA’s ability to detect any unlawful trading.
The regulator explained that Deutsche Bank took prompt steps to rectify the problem, and introduced a “system fix” on 20 April 2013. It also hired a consultant firm to carry out a two-stage review of its reporting systems and control framework, completed by December 2013.
The FCA said that Deutsche Bank avoided a higher penalty of £6.7 million by settling the case early.
''Effective market surveillance is critical to maintain the integrity of our markets and depends on accurate and timely reporting of transactions," said Tracey McDermott, the FCA’s director of enforcement and financial crime.
"Deutsche is a major market participant responsible for reporting millions of transactions every year. We have repeatedly highlighted the importance of accurate transaction reporting and taken enforcement action against a number of firms."
She added:"There is simply no excuse for Deutsche's failure to get this right. Other firms should be in no doubt about our continued focus on this issue."
Deutsche Bank is the 11th firm to be fined by the FCA over failings with transaction reporting systems, with others including Commerzbank, Societe Generale and Barclays. Royal Bank of Scotland received the largest fine, £5,620,300, for reporting millions of transactions improperly, and failing to report hundreds of thousands at all.