Proactive Investors - Citigroup Inc's (NYSE:C) Global Markets arm (CGML) has been fined over £60 million by City of London regulators after its slow reaction to a mistake by one of its traders led to US$1.4 billion of equities "being sold in European markets when they should not have been" and a sharp drop in some European market indices.
The Financial Conduct Authority said its fine of £40 million, reduced to just under £28 million due to early payment, was for "failures in systems and controls" over the actions of a CGML trader in May 2022.
The trader agreed to sell a basket of equities to the value of US$58 million but "made an inputting error" while entering the basket in an order management system, which resulted in a basket to the value of US$444 billion being created.
CGML controls blocked US$255 billion of the basket progressing but not the remaining US$189 billion, which was still sent to a trading algorithm, which was designed to place portions of this total order to be sold in the market over the rest of the day.
In total, US$1.4 billion of equities were sold across European exchanges before the trader cancelled the order, leading to a material short-term drop in some European indices over several minutes.
The FCA said "poor design" of the systems meant the trader was able to manually override a pop-up alert and Citi's real-time monitoring was "ineffective", meaning it was too slow to react to the erroneous trades.
CGML did not dispute the findings and agreed to settle, which means it has qualified for a 30% discount rather than paying the full fine of almost £40 million.
The Prudential (LON:PRU) Regulation Authority (PRA) has today also imposed a financial penalty of £33.9 million on CGML following their own investigation into related matters, with failings in its trading systems and controls between 1 April 2018 and 31 May 2022.
That fine was also reduced by 30% after Citi agreed to resolve the issue.