Photographer: Junko Kimura/Bloomberg

Deutsche Securities Warned by Japan Over Trading Collusion

  • Warning is first by fair trade commission to foreign brokerage
  • Traders exchanged info on European sovereign bonds: statement

The Japan Fair Trade Commission issued a warning to the Japanese brokerage unit of Deutsche Bank AG after it found that a trader colluded with a counterpart at Citigroup Inc. on trades of European sovereign bonds -- the first such notice handed down to a foreign securities company operating in the country.

The trader at Deutsche Securities Inc. exchanged order details and other information from April 2010 with the Citigroup employee, according to a statement published by the commission Wednesday. Starting November 2010, the two traders attempted to coordinate on pricing and share the orders between themselves, the statement said. An official at the commission, who asked not to be identified due to internal policy, said the pair had ceased their activities by March 2014.

The transaction volume ranged from several hundred million yen to several billion yen, the official said. He added, without expanding, that the commission is in talks with the Financial Services Agency over the issue.

"Deutsche Securities has already implemented improvements designed to prevent any recurrence of the conducts highlighted by the JFTC," Tokyo-based Deutsche Securities spokeswoman Atsuko Yoshitsugu said by phone after the statement was published.

First in Japan

The commission, which began the investigation in February last year, only issued a warning to Deutsche Securities as the traders only carried out such deals on "several" occasions, the official said. It didn’t give a warning to Citigroup Global Markets Japan Inc. as the brokerage has already implemented an appropriate compliance system, according to the official. Instead, it informed Citigroup verbally of the problem.

Citigroup’s Japan spokeswoman Mika Nemoto declined to comment.

The warning is the first issued by the commission to financial institutions in Japan over trades of European sovereign bonds, said the official, who added that the pair independently traded sovereign bonds of countries including Germany, France, Italy, the U.K., Denmark and Norway with institutional investors. According to the official, the traders were acquaintances and exchanged messages almost every day.

Deutsche Securities may have been in violation of section 3 (unfair restraint of trade) of the Antimonopoly Act, the statement said. The fair trade commission is responsible for enforcing this law.

    Before it's here, it's on the Bloomberg Terminal.