The four employees, who the firm said are either “suspended or on administrative leave”, are based in Deutsche’s South Korean brokerage, Deutsche Securities Korea (DSK).
The charges relate to the alleged manipulation of Seoul’s KOSPI stock market on 11 November 2010. On that day the benchmark index fell by 48 points, or 2.7%, in the last 10 minutes of trading and Korea’s Financial Services Commission (FSC) said that about 2.4trn won in sell orders from foreign investors were processed, a large majority of which had come through DSK.
In a statement released early this morning, Deutsche Bank said it “sincerely regrets the impact on the KOSPI market of an index arbitrage position unwind involving a small number of Deutsche Bank Group employees at the option maturity of 11 November 2010.”
Deutsche Bank also said it is “regrettable” that the Seoul Central District Prosecutors’ Office has decided to charge its local brokerage unit” and that it denies the charges and intends to defend against them. It added that DSK did not authorise or condone any breach of market regulation and that ultimately “DSK has every confidence in the Korean judicial system and that it will be cleared of the allegations.”
Furthermore, Deutsche Bank said it was in the process of implementing remedial measures, including disciplinary action against the relevant employees and reemphasising its existing internal control systems.
South Korea is becoming increasingly wary of the damage speculative trading can make. Earlier this month the FSC decided to temporarily ban short selling of all stocks listed on the Korea Exchange and Kosdaq markets for three months from August 10 to November 9.
