South Korea's stock market operator said Friday it will fine the local brokerage unit of Deutsche Bank a record 1 billion won (US$885,000) fine for violating trading rules.

The fine comes two days after Deutsche Securities Korea Co. was banned from some trading activities for six months for placing massive sell orders in the closing minutes of trading on Nov. 11, which sent the benchmark stock index tumbling 2.7 percent.

"The local brokerage unit's massive sell-off deteriorated the fair market and helped specific investors gain illegitimate profits," the Korea Exchange (KRX) said in a statement. "The Deutsche Bank unit also failed to abide by regulations."

To place an order during the final 10 minutes of trading, investors are required to report to the KRX by 15 minutes before the market closes at 3 p.m., but it notified one minute later than required, the KRX said.

"Other forms of punishments, including suspension of operations, were also considered but it was concluded that levying the highest amount of penalty was most efficient," said Lee Cheol-jae, an official for the KRX's market oversight division.

The highest fine previously slapped by the bourse operator was 250 million won.

The KRX also asked Deutsche Securities Korea to dismiss or suspend one unnamed employee and reprimand or cut wages of two other employees, warning it will impose additional penalties unless the request is met.

Deutsche Securities Korea said in a statement that it "deeply regrets the KRX action, but respects its decision to impose such penalties."

The Financial Services Commission (FSC) on Wednesday said it plans to partly ban Deutsche Securities Korea from trading derivatives for six months starting on April 1.

The financial watchdog also requested local prosecutors to launch an investigation into company officials for allegedly colluding to manipulate prices.   

The regulator said executives conspired to place hefty sell orders through the local securities unit in order to reap around 44.9 billion won for the unit's holdings of put options, which were structured to generate profits upon key index plunges.

The FSC, however, said it had not been able to find the German headquarters' direct role behind the carefully planned stock manipulation scheme.

(Yonhap News)