Deutsche Bank has placed two commercial mortgage-backed securities traders, Jake Markman and Paul Mashikian, on administrative leave pending an investigation into mispricings of the firm's secondary trading positions, according to firm spokesman Ted Meyer. An individual with knowledge of the situation says losses incurred as a result of the traders' activity will amount to over $30 million by the time they are fully unwound.
The problem reportedly stems from the hedging methodology the pair used to hedge the firm's portfolio of secondary market CMBS positions. Meyer did not comment on the amount, but said "no customers sustained any losses, and any losses sustained by the firm will not have a material effect on earnings."
The two traders have not been on the desk since last Thursday according to several colleagues and could not be located for comment. Their secondary trading responsibilities have been divided up among the remaining traders. Meyer says that Justin Kennedy remains the head of the trading desk. Kennedy did not return a phone call seeking comment.