Citigroup has been fined £61.6m by financial regulators after its internal systems failed to prevent a fat-fingered banker causing a flash crash by erroneously placing more than £1bn of orders.
The trader had intended to sell equities to the value of $58m (£46m) on 2 May 2022. However, the banker made an inputting error while entering the transaction into Citigroup’s order management system, so a giant equities basket of $444bn was created – and $1.4bn was then sold into the market.
The Financial Conduct Authority (FCA) said it would fine Citigroup Global Markets £27.77m over the incident on 2 May 2022, which caused a flash crash in European stocks. The Prudential Regulation Authority (PRA) also imposed a financial penalty of £33.88m after its own investigation.
The mistake happened after the Citigroup trader, whose name has not been disclosed, entered the value of the basket of equities in the wrong field into the order system.
The banker had planned to enter 58m into the “notional” field of the Citigroup order system, which would have created a basket of equities worth that value in dollars. Instead, they entered 58m into the “quantity” field of the order system – creating a giant basket of 349 stocks with a total notional size of $444bn, according to the PRA statement.
Citigroup’s internal system blocked $255bn of the equities basket progressing but the remaining $189bn was sent to a trading algorithm that sold shares into the market for the rest of the day, selling a total of $1.4bn of equities across European stock exchanges.
The FCA said the trader was able to manually override a pop-up alert, without being required to scroll down and read all the alerts within it, and the US bank’s real-time monitoring was “ineffective”, which meant that it was “too slow” to escalate internal alerts about the erroneous trades.
This sales order coincided with a significant short-term drop for a few minutes in several European markets, before the banker discovered the error and cancelled the trade 15 minutes later.
The error, which resulted in a $48m loss for Citigroup, is highly embarrassing for the bank.
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Citigroup agreed to settle with the FCA, meaning it received a 30% discount to the fine that would otherwise have been £39.66m. The PRA’s penalty of £33.88m would have been £48.4m if the bank had disputed the findings.
The bank said in a statement: “We are pleased to resolve this matter from more than two years ago, which arose from an individual error that was identified and corrected within minutes. We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.”