Citigroup systems failed to identify a human entry mistake committed by one of the company’s traders. The subsequent incorrect orders created a market disturbance.
On May 24, 2024, the Federal Financial Supervisory Authority (BaFin) fined Citigroup Global Markets Europe AG 12,975,000 euros.
Fine were levied on Citigroup on charges of violation of its responsibilities under the German Securities Trading Act.
Citigroup Global Markets Europe AG outsourced its algorithmic trading monitoring and administration system to London-based Citigroup Global Markets Limited (CGML) .
According to the Regulator, regardless of the outsourcing of trading related functions, Citigroup Global Markets Europe AG continues to be responsible for properly developing and running its trading system.
Citigroup systems failed to identify a human entry mistake committed by one of the company’s traders. The subsequent incorrect orders created a market disturbance.
Risk happened on May 2, 2022, when an experienced trader entered an order erroneously, leading in the execution of US$1.4 billion on European markets.
Citigroup Global Markets Europe AG lacked adequate procedures and risk controls in May 2022 to guarantee that its trading systems were subject to suitable trading thresholds and restrictions. The investment business also failed to prevent the transmission of incorrect orders, which might cause or contribute to a turbulent market.
Earlier fine was imposed on Citigroup by UK Banking Regulator.
The Prudential Regulation Authority (PRA) fined Citigroup Global Markets Limited (CGML) £33,880,000 for deficiencies in its trading systems and controls between April 1, 2018, and May 31, 2022.
Financial Conduct Authority (FCA) also levied £27,766,200 as penalty on CGML for the weakness in trading system. UK authorities’ concurrent investigations resulted in a total financial penalty of £61,600,000 on Citigroup
CGML received frequent supervisory communications from the PRA over the relevant period, but it was unable to achieve the control criteria for risk management in its trading systems. Citigroup agreed to settle the charges and was eligible for a 30% reduction in the financial penalty.
Following the trading event on May 2, 2022, the PRA directed CGML to improve its trading controls.
Investment businesses has ensure that their trading systems are robust, have adequate capacity, and adhere to acceptable trading thresholds and constraints. One reason for this is because overloaded trading systems are a significant danger to financial markets. Furthermore, businesses must take steps to avoid the transmission of incorrect orders, which may cause or contribute to a chaotic market.
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