Citigroup Inc’s (NYSE) Global Markets division (CGML) has been penalized over £60 million by regulators in the City of London after a delayed response to a trading error led to US$1.4 billion of equities being erroneously sold in European markets, causing a significant dip in certain European stock indices.
The Financial Conduct Authority imposed a fine of £40 million, which was reduced to just under £28 million due to early settlement, citing “failures in systems and controls” related to a mishap by a CGML trader in May 2022.
This error occurred when the trader intended to sell a basket of equities worth US$58 million but mistakenly entered a value of US$444 billion into an order management system. Although CGML’s controls halted US$255 billion of the transaction, US$189 billion proceeded to a trading algorithm that distributed parts of this enormous order across the market throughout the day.
Consequently, US$1.4 billion worth of equities were sold on European exchanges before the order was cancelled, leading to a sharp, brief decline in some European indices.
The FCA criticized the “poor design” of the systems that allowed the trader to bypass a warning alert manually and noted that Citi’s real-time monitoring was “ineffective,” resulting in a sluggish response to the faulty trades.
CGML accepted the findings and settled early, securing a 30% reduction in the fine, which would have otherwise been nearly £40 million.
Additionally, the Prudential Regulation Authority (PRA) has imposed a £33.9 million fine on CGML after their own probe into related issues, finding deficiencies in its trading systems and controls from April 1, 2018, to May 31, 2022. This fine was also reduced by 30% following Citigroup’s agreement to address the problems.
