Citigroup Global Markets (CGML), a capital market company and subsidiary of Citigroup, has been fined £61.6m by the UK’s Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
The fine is in response to alleged failures in Citigroup Global Markets’ trading systems and controls.
According to the investigations, it was found that between 1 April 2018 and 31 May 2022, the firm’s inadequate systems and controls led to the erroneous sale of $1.4bn worth of equities in European markets.
The incident was triggered on 2 May 2022, when a Citigroup Global Markets’ trader intended to sell a basket of equities valued at $58m. Due to an input error, a basket worth $444bn was created instead.
Although the firm’s controls blocked $255bn of the erroneous order, $189bn was processed and sent to a trading algorithm. This algorithm placed portions of the order in the market throughout the day, resulting in $1.4bn of equities being sold across European exchanges.
The unintended sale caused a brief but significant drop in some European indices.
According to the FCA, the investigation highlighted significant deficiencies in Citigroup Global Markets’ trading control framework. There were no hard blocks to entirely prevent such a large erroneous order from reaching the market.
Additionally, a poorly designed alert system allowed the trader to manually override warnings without fully acknowledging them. Ineffective real-time monitoring further delayed the escalation of internal alerts regarding the erroneous trades, said the regulator.
FCA enforcement and market oversight joint executive director Steve Smart said: “The FCA expects firms engaged in trading activities, including those using algorithmic trading, to have effective systems and controls in place to stop errors like this occurring.
“These failings led to over a billion pounds of erroneous orders being executed and risked creating a disorderly market. We expect firms to look at their own controls and ensure that they are appropriate given the speed and complexity of financial markets.”
The FCA has fined the company £27.7m while the PRA imposed a fine of £33.8m.
Citigroup Global Markets resolved the issue with regulators without dispute, resulting in reduced fines.
