Citi just got the bill for its $189 billion trading mess-up

UK regulators slapped a combined £62 million ($79 million) fine on Citigroup Wednesday for failures in its trading systems that almost resulted in stocks worth $189 billion being dumped onto European markets. The Financial Conduct Authority (FCA) imposed a fine of nearly £28 million ($36 million) on Citigroup (C), while the Bank of England’s Prudential Regulation Authority fined it almost £34 million ($43 million) following investigations into the US bank, according to statements from the authorities. The regulators reduced their fines by 30% because Citigroup agreed to settle the matter. Without that discount, the combined fine would have topped £88 million ($112 million). “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,” a Citigroup spokesperson told CNN. “We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.” The spokesperson declined to comment on reports that the trade was the result of a fat-finger error, where incorrect data is inputted because the wrong key is pressed. The Bank of England highlighted an incident in May 2022 when one of Citigroup’s “experienced” traders sold $1.4 billion worth of stocks on European exchanges in error, triggering what brokers described at the time as a “flash crash.” In its statement, the FCA said the unnamed trader had intended to sell stocks worth only $58 million, but made an “inputting error,” which resulted in an order to sell $444 billion. Citigroup’s systems blocked $255 billion of that, meaning that $189 billion was sent to its trading platformfor sale “over the rest of the day.” In total, $1.4 billion worth of stocks was sold before the trader canceled the transaction. “There was no hard block that would have rejected this large erroneous basket of equities in its entirety and prevented any of it reaching the market,” the FCA said, adding that the failings risked creating “a disorderly market.” The FCA also highlighted the ability of the trader to manually override a pop-up alert, without being required to read all the details it contained, and the bank’s “ineffective” real-time monitoring, which meant alerts were escalated too slowly. Following the incident, Citigroup has taken steps to “improve and strengthen” the security of its trading systems, the central bank said. “Firms involved in trading must have effective controls in place in order to manage the risks involved. (Citigroup) failed to meet the standards we expect in this area, resulting in today’s fine,” said Sam Woods, chief executive officer of the Prudential Regulation Authority.

Another costly error for Citigroup

It is not the first time Citigroup has blundered. In 2020, the bank accidentally wired $900 million in interest payments to the lenders of cosmetics company Revlon — more than 100 times the intended amount. Some lenders returned the money, but others did not. A US district court judge ruled in 2021 that the bank would not be allowed to recover the outstanding $500 million. Another trading mishap in 2014 — unconnected to Citigroup — rattled the Japanese stock market. An anonymous broker made and then swiftly canceled orders for more than $600 billion worth of stocks, the BBC reported at the time.