United States District Court, S.D. New York
AXIOM INVESTMENT ADVISORS, LLC, by and through its Trustee Gildor Management, LLC, et al., Plaintiffs,
DEUTSCHE BANK AG, Defendant.
ORDER AND OPINION
G. SCHOFIELD UNITED STATES DISTRICT JUDGE.
putative class action arises out of Defendant Deutsche Bank
AG's (“Deutsche Bank”) alleged practice of
delaying execution of electronically matched trade orders in
the foreign exchange (“FX”) market in order to
take advantage of how the market moved in the interim -- a
practice known as “Last Look.” Plaintiffs Axiom
Investment Advisors, LLC and Axiom Investment Company, LLC,
by and through their Trustee Gildor Management, LLC
(collectively “Axiom”), assert claims against
Deutsche Bank for breach of contract, breach of the implied
covenant of good faith and fair dealing, violations of N.Y.
General Business Law §§ 349 and 350, and unjust
enrichment. Deutsche Bank moves to dismiss Plaintiffs'
claims pursuant to Federal Rule of Civil Procedure 12(b)(6).
For the following reasons, the motion is granted in part and
denied in part.
purposes of Deutsche Bank's motion, the following facts
are drawn from the Complaint and documents integral to the
Complaint. The facts are construed in the light most
favorable to Axiom as the non-moving party. See
Littlejohn v. City of New York, 795 F.3d 297, 306 (2d
or foreign currency, market is the largest and most actively
traded financial market in the world, with global trades
averaging $5.3 trillion per day. Rather than occurring on a
centralized exchange, the vast majority of FX trading is
accomplished through bilateral contracts between two
counterparties. In these bilateral contracts, large banks
such as Deutsche Bank represent the “sell side”
and act as liquidity providers or market makers.
Institutional investors, asset managers, corporations, hedge
funds and wealthy private investors represent the “buy
most FX trades occur on electronic trading platforms.
Electronic trading platforms display price and quantity data
for various currency pairs. The price and quantity data
reflect limit orders placed by liquidity providers. Because
the FX market is extremely active, the limit orders are
filled or withdrawn within milliseconds and replaced with new
limit orders reflecting the new market price. Consequently,
someone using an electronic trading platform sees a
constantly updating stream of prices.
are two general types of electronic trading platforms --
single-dealer and multi-dealer. On a single-dealer platform,
a single liquidity provider places limit orders. On a
multi-dealer platform, commonly referred to as an electronic
communications network or “ECN, ” multiple
liquidity providers place limit orders.
Bank trades on both single-dealer and multi-dealer platforms.
Deutsche Bank operates a single-dealer platform called
Autobahn. Autobahn claims to provide “competitive and
reliable prices in over 200 currency pairs” with
“dynamically priced executable streaming prices
customized to suit each client's requirements.”
From 2006 to 2011, Deutsche Bank operated a second
single-dealer platform called dbFX, which offered 34 currency
pairs and “streaming realtime executable currency
quotes, 24 hours a day.” Deutsche Bank also
participates in multiple ECNs, including Currenex, Hotspot,
FXAll and 360T.
Plaintiff or another buy-side market participant enters an
order on an electronic trading platform, computer algorithms
match that order to other outstanding orders on the platform.
These algorithms can match orders within several
milliseconds. Speed is critical because prices in the FX
market can vary significantly in a second. Plaintiff alleges,
however, that beginning in 2003, Deutsche Bank arranged for
the matching algorithms used by Autobahn and other ECNs to
include an unnecessary delay of anywhere from several hundred
milliseconds to several seconds. During the delay, Deutsche
Bank monitored the market movement and determined whether
executing the order at the matched price would be favorable
to it. If the market moved against Deutsche Bank beyond a
predetermined threshold by the end of the delay period,
Deutsche Bank would either reject the matched order or
execute it at the new price. This practice is known as Last
to the Complaint, Deutsche Bank never directly disclosed Last
Look to buy-side FX market participants who transacted on
electronic trading platforms. Because the process of matching
orders is undisclosed to market participants and is usually
completed in less than a second, buy-side market participants
have no way of knowing whether any of their trades were
delayed by Deutsche Bank's use of Last Look or whether
Deutsche Bank reneged on any of their matched orders.
Although reports of FX liquidity providers using Last Look
first surfaced “several years ago, ” the
liquidity providers said at that time that Last Look was
necessary to ensure that multiple trades were not executed on
a single order. The Complaint alleges that this explanation
was “pretextual and misleading” because Last Look
was neither necessary to avoid executing multiple trades on a
single order nor restricted to that function. The alleged
abuse of Last Look did not start receiving attention among
buy-side FX market participants until the summer of 2014,
when several news articles reported that liquidity providers
had been accused of using Last Look “aggressively to
dial up the profitability of their books.”
a motion to dismiss, all factual allegations in the complaint
are accepted as true and all inferences are drawn in the
plaintiff's favor.” Littlejohn, 795 F.3d
at 306. “In determining the adequacy of the complaint,
the court may consider any written instrument attached to the
complaint as an exhibit or incorporated in the complaint by
reference, as well as documents upon which the complaint
relies and which are integral to the complaint.”
Subaru Distribs. Corp. v. Subaru of Am., Inc., 425
F.3d 119, 122 (2d Cir. 2005) (citation omitted); see also
Beauvoir v. Israel, 794 F.3d 244, 248 n.4 (2d Cir.
survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice.” Id. “[W]hatever documents
may properly be considered in connection with the Rule
12(b)(6) motion, the bottom-line principle is that
‘once a claim has been stated adequately, it may be
supported by showing any set of facts consistent with the
allegations in the complaint.'” Roth v.
Jennings, 489 F.3d 499, 510 (2d Cir. 2007) (quoting
Twombly, 550 U.S. at 563).
explained below, Deutsche Bank's motion to dismiss is
granted as to Axiom's claims for breach of the implied
covenant of good faith and fair dealing (Count III),
deceptive trade practices (Count IV), false advertising
(Count V) and unjust enrichment based on transactions that
occurred on Autobahn (Count VI), but denied in all other
Breach of Contract ...