Deutsche Bank accidentally pays hedge fund $6 billion

Deutsche Bank mistakenly paid a hedge fund client $6 billion in a “fat finger” trade on its foreign exchange desk in London, according to reports.

The mistake, which was rectified within 24 hours, is believed to have occurred when a junior member of the FX sales team paid out a gross instead of net amount to the hedge fund earlier in the summer. The incident was reported to the US Federal Reserve, the European Central Bank (ECB) and the UK Financial Conduct Authority (FCA).

While the event was resolved quickly, it does raise questions about operational risk and the quality of technology systems at banks more broadly. A number of banks including Deutsche Bank have said they will increase technology spending.

Many banks and fund managers will use circuit breakers to mitigate the risk of erroneous transactions. If a transaction, for example, exceeds a certain risk or price parameter, circuit breakers will usually force a halt to it.

The fat finger incident comes as Deutsche Bank reshuffles some of its senior management. Deutsche Bank is combining its global transaction business with its corporate finance division at its investment bank.