UK FCA Fines Citigroup $46 Mln after $1.4 Bln ‘Fat Finger’ Error

BySamson Ononeme

May 22, 2024 , ,
Citigroup was hit with a $46 mln fine by UK regulators over a $1.4 bln "fat finger" trading blunder that sent shockwaves across European markets.

Key Insights

  • The UK’s FCA fined Citigroup $46 million over a $1.4 billion “fat finger” trading error that sent equities plunging across European markets in 2022.
  • A Citigroup trader accidentally created a $444 billion basket order instead of $58 million, with $1.4 billion worth of equities sold before it was cancelled.
  • The FCA cited failures in Citigroup’s trading controls, including lack of “hard blocks” to reject erroneous orders and ineffective trade monitoring.

LONDON (MarketsXplora) – Britain’s Financial Conduct Authority (FCA) has fined Citigroup Global Markets Limited (CGML) 27.8 million pounds ($46 million) for failings that resulted in $1.4 billion worth of equities being sold across European markets due to an trader error.

In an embarrassing blunder on May 2, 2022, a CGML trader inadvertently created an order basket worth $444 billion instead of the intended $58 million after making an input mistake, the FCA said on Wednesday.

While the bank’s controls blocked most of the massive erroneous trade from progressing, $189 billion was sent to a trading algorithm that began executing equity sell orders, coinciding with a short-term plunge in some European stock indexes.

Over $1.4 billion in equities were ultimately sold before the trader cancelled the order, the FCA said, adding the episode demonstrated “deficient” risk controls at CGML’s trading desk in London.

The fine relates to CGML’s failure to maintain appropriate trading controls, including the lack of a “hard block” that could have rejected the outsize basket order entirely before any part reached the market.

Additionally, the trader was able to manually override pop-up alerts without being required to read them fully, while CGML’s real-time monitoring failed to swiftly escalate internal warnings about the erroneous trades.

“We expect firms engaged in trading activities to have effective systems and controls in place to stop errors like this occurring,” said Steve Smart, the FCA’s co-head of enforcement.

The erroneous sell-off comes amid heightened regulatory scrutiny of so-called “fat finger” errors and risk controls at major trading houses following a string of such high-profile failures in recent years.

Read also! BaFin Penalizes Citigroup $13.8 Mln for Algorithmic Trading Flaws

CGML, which settled the case earning a 30% discount, also drew a separate $44 million fine from the Bank of England’s Prudential Regulation Authority in relation to the matter.

A Citigroup spokesperson said the bank had “engaged sincerely” with regulators and taken steps to enhance trading book oversight and controls across algorithms and human traders.

Samson Ononeme

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