Deutsche Bank's South Korean brokerage unit was fined nearly $1 mln by the nation's exchange operator, the largest ever imposed by it, for failing to notify it about big derivative trades on time.
The Korea Exchange (KRX) also wanted that one Deutsche employee resign or be suspended, and that two other employees at the firm be demoted or reprimanded.
"Deutsche failed in its duty to notify the Korea Exchange on time about its programme trades, hurting investor trust in our regulatory system and causing confusion (in the market)," said Lee Cheol-jae, an executive director of the exchange's Market Oversight Division.
The KRX decision follows a ruling by the country's top financial regulator on Wednesday that the Deutsche unit manipulated the stock market through massive derivatives trades on November 11, triggering a market tumble.
"Deutsche Securities Korea deeply regrets the KRX action, however respects its decision to impose such penalties," the German bank said in a statement.
Michael West, head of communications for Deutsche Bank in Asia-Pacific, said the bank would not be "making any comments in relation to our employees."
The Financial Services Commission said Deutsche made $40.1 mln in improper profits by manipulating the stock market and suspended some of its operations for six months.
"KRX will not take any actions on profits Deutsche made. Prosecutors may deal with it, however," said bourse spokesman Won Young-joon.
The FSC has decided to take five Deutsche employees to prosecutors for investigation.
'UNFAIR PROFIT'
Deutsche was one minute late in informing KRX about the large sell order coming from its accounts, according to the bourse.
The exchange also said the firm made "unfair profit" after buying a massive volume of put options and subsequently issuing sell orders for stocks worth around 2.4 trln won.
The fine is the largest levied by the Korea Exchange on a brokerage, with the previous record being a 250 mln won ($221,800) penalty imposed on Kiwoom Securities in June, 2009.
The KRX on Friday also issued a warning to Hana Daetoo Securities for providing margin deposits on derivative trades late.
A local fund management firm, Wise Asset Management Co, saw losses of around 89 bln won due to the November 11 market plunge. Hana Daetoo, which traded put options for Wise Asset, shouldered 76 bln won of those losses.
Record foreign selling including from Deutsche accounts minutes before the market closed on November 11 led to a 53-point drop in the KOSPI amid options expiry.
Korea's action comes as exchanges and regulators in many countries are trying see how to prevent very sharp short-term moves in markets.
In the United States, where the Dow Jones industrial average tumbled 700 points in minutes before rebounding in the unprecedented May 6 'Flash crash', a panel of experts called for regulators to stem the growing tide of anonymous stock-trading, and to consider imposing fees on high-frequency traders.
