The UK Financial Conduct Authority (FCA) has fined Citigroup Global Markets Limited (CGML) £27,766,200.
Failures in the company’s systems and controls led to $1.4 billion of shares being sold in European markets when they should not have been.
On May 2, 2022, a CGML trader intended to sell a basket of stocks worth US$58 million. The merchant made an input error when entering the cart in an order management system. This resulted in a basket worth $444 billion.
CGML controls blocked $255 billion of the basket from moving forward, but not the remaining $189 billion sent to a trading algorithm. The algorithm chosen was designed to place portions of this total order to sell in the market during the rest of the day.
A total of $1.4 billion of shares were sold on European exchanges before the trader canceled the order. This coincided with a significant short-term decline in some European indices that lasted a few minutes.
While parts of CGML’s transaction control framework worked as CGML expected, some key controls were absent or inadequate. In particular, there was no hard block that would reject this large misguided basket of stocks in its entirety and prevent it from entering the market.
Due to poor design, the marketer was also able to manually override a pop-up notification without having to scroll down and read all the notifications within it. The company’s real-time monitoring was ineffective, which meant it was too slow to escalate internal alerts about incorrect transactions.
CGML did not dispute the FCA’s findings and agreed to settle, meaning it is entitled to a 30% discount. Without this discount, the amount of the financial penalty imposed by the FCA would have been £39,666,000.
On 22 May 2024, the Prudential Regulation Authority (PRA) also fined CGML £33,880,000 following its own investigation into related matters.