Financial services watchdogs have fined US banking giant Citigroup £61.7 million after its systems failed to prevent a ‘fat finger’ error worth $444 billion — more than the GDP of Denmark.
According to the Financial Conduct Authority (FCA), a Citigroup Global Markets trader made “an inputting error” while trying to sell stocks on 2 May 2022. Instead of selling $58 million of shares, they put in an order to sell $444 billion worth.
Citigroup was able to block $255 billion of the order being traded, but not the other $189 billion. A trading algorithm was tasked with selling the massive order over the course of the day.
The trader was able to cancel the order, but not before $1.4 billion of the shares were already sold.
Those deals alone were big enough to create “a material short-term drop” in some European indices. On the morning of 2 May, the continent’s main stock index, the Euro Stoxx 50, fell by more than 1% in the space of just three minutes, equivalent to a loss of more than €80 billion, before a quick rebound.
The FCA said part of Citigroup’s controls worked as expected, but “some primary controls were absent or deficient”.
It added: “ In particular, 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 watchdog noted that the trader was able to “manually override a pop-up alert” without reading it, due to “poor design”. Citigroup was also “too slow to escalate internal alerts about the erroneous trades”.
As a result, the FCA fined Citigroup £27.8 million. The fine would have been even bigger but the bank got a 30% discount for not disputing the findings. Meanwhile, the Bank of England’s Prudential Regulation Authority issued its own penalty of £33.9 million after an investigation into “related matters”. Combined, the two fines are worth £61.7 million.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “The FCA expects firms engaged in trading activities, including those using algorithmic trading, to have effective systems and controls in place to stop errors like this occurring.
“These failings led to over a billion pounds of erroneous orders being executed and risked creating a disorderly market. We expect firms to look at their own controls and ensure that they are appropriate given the speed and complexity of financial markets.”
