South Korea bans Deutsche Bank from proprietary trading

Imposing one of the harshest penalties for unfair trading, South Korean market regulators have banned the local unit of German banking giant Deutsche Bank from proprietary stock and derivatives trading for six months for illegal profit making through stock market manipulation last year.

The sanctions issued by the nation's financial watchdog, the Financial Services Commission (FSC) is the result of its investigation on substantial sell orders during the last minutes of trade on 11 November 2010, on an option's expiry date that led to a 2.8-per cent plunge in the KOSPI 200 index.

The findings revealed that manipulative selling by the German bank's local brokerage unit, Deutsche Securities Korea (DSK) during the last test minutes of trade in the index stocks, valued at around 2.44 trillion Korean won ($2.2 billion) resulted in illegal gains of about 45 billion won ($40 million).

The regulators also asked prosecutors to investigate five top officials of Deutsche Bank: three from the Hong Kong branch, one from Seoul, and one from New York for their involvement in the manipulation.

"We decided to slap the severe punishment, holding employees of Deutsche Bank accountable for manipulating stock prices,'' the FSC said.

In a statement, Deutsche Bank said that it was ''disappointed'' by the recommendations of the FSC in relation to the allegations of market manipulation by the bank's employees on 11 November and the involvement of its local unit, DSK.