London [UK], May 22 : The Financial Conduct Authority (FCA) has fined brokerage Citigroup Global Markets Limited (CGML) worth about Euro (£) 61.6 million, for a failure in the firm's systems and controls back in 2022.
The system failure in the firm led to USD 1.4 billion of equities being sold in European markets when they should not have been.
On May 2, 2022, a Citigroup trader had intended to sell a basket of equities to the value of USD 58 million. According to the regulator FCA, the trader made an inputting error while entering the basket in an order management system, resulting in a basket to the value of USD 444 billion being created.
Citigroup controls blocked USD 255 billion of the basket progressing, but not the remaining USD 189 billion which was sent to a trading algorithm.
"In total USD 1.4 billion of equities were sold across European exchanges, before the trader cancelled the order. This coincided with a material short-term drop in some European indices which lasted a few minutes," FCA said in a statement.
While parts of Citigroup's trading control framework operated as it was expected, some primary controls were absent or deficient.
"In particular, there was no hard block that would have rejected this large erroneous basket of equities in its entirety and prevented any of it reaching the market," FCA observed in the statement.
The firm's real-time monitoring was ineffective, which meant that it was too slow to escalate internal alerts about the erroneous trades, FCA said.
'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,' Steve Smart, joint executive director of enforcement and market oversight at the FCA, said.
According to FCA, Citigroup did not dispute the its findings and agreed to settle, which means it has qualified for a 30 per cent discount.
Without this discount, the amount of financial penalty imposed by the FCA would have been much higher.
On 22 May 2024, the Prudential Regulation Authority (PRA) also imposed a financial penalty of Euro 33,880,000 on Citigroup following its own investigation into related matters.
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