FX Investigations Move to Algorithms as NYDFS Monitors Deutsche’s Autobahn Platform

Tuesday, 10/02/2015 | 09:41 GMT by Ron Finberg

According to a report from Reuters, the NYDFS has placed monitors in Deutsche Bank's Autobahn electronic trading platform to analyze algorithms used for executions and pricing of FX trades.

FX Investigations Move to Algorithms as NYDFS Monitors Deutsche’s Autobahn Platform

In July of last year, it was reported that the New York Department of Financial Services (NYDFS) would be placing monitors at the Deutsche Bank and Barclay’s. The monitors were to assist in gathering information of the bank’s foreign exchange (FX) trading practices as part of the banking regulator’s investigation of currency price manipulation. So far, investigations by global regulators have led to the issuing of more than $3 billion in fines last November by the CFTC and FCA.

Following the story last July, according to a new report from Reuters, the NYDFS has initiated its monitoring of Deutsche Bank’s Autobahn electronic Trading Platform . For the monitoring process, the NYDFS selected Treliant Risk Advisors to review Deutsche Bank’s platform. According to Reuters, the monitoring process will be focusing on Deutsche Bank’s use of algorithms to control currency rates and whether they are being used to manipulate pricing and execution in the bank’s favor against their customers. The research into algorithms is seemingly an expansion of the previous investigation into whether banks colluded on FX fix rates.

As one of the largest primary FX dealers in the world, algorithms are a key part of Deutsche Bank’s FX technology as they are used to control and dynamically adjust pricing the stream to their clients. Monitoring countless data points in seconds, the high end of FX Liquidity software utilizes expensive complex event processing (CEP) technology to handle changing market conditions to automatically control prices stream and manage risk. The programs could also theoretically be used to negatively slip customer exactions by temporarily delaying their fills for split seconds.

For Deutsche Bank, the monitoring of its FX trading occurs after an active beginning of 2015. The bank is believed to have lost around $150 million on the Black Thursday Swiss franc move, but later reported that they had still managed to be profitable in its FX trading during January. The comments came as Co-CEO Anshu Jain, spoke to shareholders following the bank’s issuing of their Q4 2014 financial results which were highlighted by growth in FX trading.

Media reports showed that New York's financial regulator has sent subpoenas to leading global banks, Goldman Sachs, Credit Suisse, BNP Paribas and Societe General, thus extending the investigations of the FX fixing rates and exploring the automated aspects that could impact the market, people familiar with the matter said.