The UK regulators fined Citigroup a total of £62 million for failures in its trading systems that nearly resulted in stocks worth $189 billion being dumped onto the European markets. The Financial Conduct Authority imposed a fine of nearly £28 million, while the Bank of England’s Prudential Regulation Authority fined the US bank almost £34 million. The fines were reduced by 30% because Citigroup agreed to settle the matter. A spokesperson for Citigroup acknowledged the error that led to the incident, which was quickly identified and corrected within minutes. Steps were taken to strengthen systems and controls to ensure full regulatory compliance.
The incident in May 2022 involved an experienced trader at Citigroup selling $1.4 billion worth of stocks on European exchanges in error. The trader had intended to sell stocks worth only $58 million but made an inputting error, resulting in an order to sell $444 billion. Only $255 billion of that was blocked by Citigroup’s systems, with $189 billion sent to the trading platform for sale over the course of the day. In total, $1.4 billion worth of stocks was sold before the trader canceled the transaction. The FCA highlighted that there was no hard block in place that would have prevented the erroneous order from reaching the market, risking a disorderly market.
The FCA also noted that the trader had the ability to manually override pop-up alerts without reading all the details and that the bank’s real-time monitoring was ineffective, resulting in alerts being escalated too slowly. Citigroup has since taken steps to improve and strengthen the security of its trading systems in response to the incident. Sam Woods, the chief executive officer of the Prudential Regulation Authority, emphasized the importance of effective controls in managing risks involved in trading activities. Citigroup’s failure to meet the expected standards in this area resulted in the fines imposed by the regulators.
Citigroup’s spokesperson declined to comment on reports that the trading error was the result of a fat-finger error, where incorrect data is inputted due to pressing the wrong key. The incident highlighted the importance of having effective controls in place to prevent similar errors that could lead to significant losses in the market. The fines imposed on Citigroup serve as a reminder of the consequences of failing to meet regulatory standards in trading activities. The authorities commended Citigroup for agreeing to settle the matter and for taking steps to strengthen its systems and controls to ensure full compliance with regulations. Moving forward, it will be crucial for financial institutions to remain vigilant in monitoring and improving their trading systems to prevent such incidents in the future.
