The German banking behemoth last week was ordered to pay fines totaling more than $40 million to numerous US regulators and government departments.

Deutsche Bank will pay $37 million to terminate government investigations into how it misled clients and routed trades to “dark pool” private trading venues, a US financial watchdog said last week.

A dark pool is a type of alternative trading system which gives investorsd the opportunity to place orders and make trades without publicly announcing their intentions until the sale has been executed. They are mostly used for block trades involving as large number of securities.

According to the Securities and Exchange Commission Deutsche Bank made “materially misleading” statements and omissions concerning the dark pool ranking model feature of one of its orders routers, the SuperX+. The model was intended to measure execution quality and liquidity of venues to which it sent orders and Deutsche Bank used it to determine which venues would receive orders and the sequence in which they would be sent. In a description offered to its clients, the bank described the model as the “quantitative core” of SuperX+, and stated that it “smartly routes and selects optimal pools of liquidity on an order by order basis”.

However, the SEC found that due to a coding error, Deutsche Bank updated the ranking model just once during a two-year period, which caused at least two dark pools to receive inflated rankings and consequently millions of orders. Additionally, the bank was found to have manually overrode rankings on certain occasions and assigned fill rates for new venues based on "subjective judgement", the SEC said.

As a result, the New York Attorney General's office last week announced that the Frankfurt-headquartered bank agreed to admit wrongdoing and pay two $18.5 million penalties to the SEC and the NYAG.

Last week, another US regulator – the Financial Industry Regulatory Authority – fined the German banking giant $3.25 million for failing to provide a consistent standard of information to all of its clients regarding its Alternative Trading System.

An ATS is a trading venue that executes trades in securities on behalf of broker-dealers and other traders. SEC regulation requires ATS operators to disclose certain information to the regulator by filing a form.

In Deutsche Bank's submission, the firm represented that it would provide all ATS users with “identical access to all services and features” offered. 

However, FINRA found that the bank failed to “timely or completely disclose to all users the availability of certain ATS services and features”. As a result, some ATS clients requested and received services that others may not have known were available, therefore meaning all users did not have identical access to all services as the bank initially claimed. 

“ATSs are significant and important trading venues in today’s equity marketplace. Broker-dealers that operate an ATS must provide complete and accurate information to their customers regarding access to the ATS’s services and features to ensure that customers using the trading platform are not disadvantaged,” said Thomas Gira, executive vice president of FINRA’s market regulation department.