The bank failed to ensure that the correct procedures were followed in the purchase of shares in Swedish truck-making firm Scania, and in the sale of shares in Swiss company Cytos Biotechnology.
A further Â£350,000 fine has been issued to David Maslen, the former head of the Deutsche Bank European cash trading, for his role in the affair.
Hector Sants, FSA's managing director of wholesale business, said that the fine was justified.
"Deutsche's failure is an example of the type of conduct which the FSA will act against in its efforts to improve the overall quality of markets," he said.
"We expect firms, and their staff, to be aware of the issues that are inherent in all transactions," he added.
Deutsche Bank expressed their regret over the mistakes made, but insisted that it was an isolated incident.
The fine is the third largest ever issued by the FSA, following a Â£17 million fine imposed on Shell for market abuse in 2004, and Citigroup's Â£13.9 million fine last year.