February 9, 2015 / 5:16 PM / 4 years ago

Exclusive: NY monitor in Deutsche to probe possible forex rigging - sources

(Reuters) - Deutsche Bank AG’s electronic foreign exchange trading platform is now under the scrutiny of a monitor installed by New York’s banking regulator, as part of a probe into whether the German lender manipulated the currency market, people familiar with the matter told Reuters.

Treliant Risk Advisors, a Washington, D.C.-based firm, was selected by New York’s Department of Financial Services and began to examine Deutsche Bank in recent weeks, with algorithms used in its Autobahn trading platform being one area of focus, sources said.

The regulator’s probe of automated trading suggests that potential currency price manipulation at major financial institutions may extend beyond the alleged collusion between certain individual employees that has been the focus of government investigations and private litigation.

Reuters reported in December that the New York regulator, overseen by financial services superintendent Benjamin Lawsky, was probing whether Deutsche and Barclays used algorithms to manipulate foreign exchange rates.

Investigators are trying to ascertain whether such algorithms allow them to take advantage of clients when pricing currency transactions.

Jim Cochrane, director of analytics at foreign exchange broker ITG, said the monitors could be useful in seeing how quickly client orders come in, how quickly they are filled, and whether clients are getting the best price available.

“Electronic front-running is something that needs to be prevented,” Cochrane said.

Lawsky had been pushing for monitors to be installed at Deutsche and Barclays since the summer. Reuters reported in November that the regulator had selected specialist advisory firm Devon Capital as a monitor for Barclays.

“Deutsche Bank has received requests for information from regulatory authorities that are investigating trading in the foreign exchange market,” the Frankfurt-based bank said in a statement. “The bank is cooperating with those investigations.”

Treliant Risk Advisors is a compliance, risk management and advisory firm for the financial services industry, according to its website.

Treliant Chief Executive Andrew Sandler is also executive partner of financial services law firm BuckleySandler.

Sandler and Treliant declined comment.

In November, Reuters reported that Barclays did not join a $4.3 billion settlement over alleged manipulation of foreign exchange rates because of issues with Lawsky’s agency.

The settlement with U.K. and U.S. authorities followed a year-long global investigation of banks’ failure to stop traders from trying to manipulate the foreign exchange market. Deutsche Bank also was not among the banks that settled.

Reporting By Karen Freifeld; Editing by Christian Plumb

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