Deutsche Securities warned by Japan over bond trading collusion

[TOKYO] 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 to as late as March 2014 with the Citigroup employee, according to an official at the commission, who asked not to be identified due to internal policy. In November 2010, the two traders agreed to coordinate on pricing and share the orders between themselves, the official said.

Deutsche Securities' Tokyo-based spokeswoman Atsuko Yoshitsugu and Citigroup's Japan spokeswoman Mika Nemoto both 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 UK, Denmark and Norway with institutional investors. According to the official, the traders were acquaintances and exchanged messages almost every day.

The commission only issued a warning to Deutsche Securities as the two 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.

The two traders may have acted in violation of Japan's Antimonopoly Act, the official said. The fair trade commission is responsible for enforcing this law.

BLOOMBERG