Stay informed with free updates
Simply sign up to the UK financial regulation myFT Digest — delivered directly to your inbox.
UK regulators have fined Citigroup £62mn for failures in its trading controls that in one case led to $1.4bn of equities being mistakenly sold in a so-called fat-finger trade.
The penalties arise from incidents between 2018 and 2022, including the incorrect sale of $1.4bn of shares across several European exchanges.
The sale in May 2022 “coincided with a material short-term drop” in some European indices, the Financial Conduct Authority said on Wednesday, as it imposed a penalty of £27.8mn on the US bank.
Citigroup was also fined £33.9mn by the Prudential Regulation Authority, which conducted its own investigation.
“Firms involved in trading must have effective controls in place in order to manage the risks involved. CGML [Citigroup Global Markets Limited] failed to meet the standards we expect in this area, resulting in today’s fine,” said Sam Woods, chief executive of the PRA.
In its statement, the FCA laid out the fat-finger trade in which human error was responsible for incorrectly inputting a transaction.
A Citi trader in May 2022 intended to sell a basket of shares with a value of $58mn but entered details that created a basket valued at $444bn.
Citi’s internal controls blocked $255bn of the trade from going through, but $189bn in shares were sent to a trading algorithm to execute the sales. Before the trader cancelled the order, $1.4bn in shares had been sold.
The incident happened at the same time as a sharp sell-off in shares in Nordic stocks during what would normally have been a quiet Monday morning trading session.
The FCA said that while parts of Citi’s trading control framework worked as expected, some primary controls were “absent or lacking”. The regulator said there was no block in place that would have prevented such a large erroneous basket of shares reaching the market.
It added that the trader was able to manually override a pop-up alert on the trade without having to scroll down to check which alerts were flagged. Citi’s real-time monitoring was ineffective, resulting in a slow response to the trades, the regulator said.
Citi agreed to settle the case and so qualified for a discount on the fines
In a statement, Citi said: “We are pleased to resolve this matter from more than two years ago, which arose from an individual error that was identified and corrected within minutes. We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.”
Read the full article here
