Citi has been fined £62m by UK regulators after a “fat finger” trade triggered a flash crash on the European stock market.
The Wall Street bank’s controls were “deficient” and monitoring of the incident had been “ineffective” after it occurred in May 2022, the Financial Conduct Authority (FCA) said.
The Citi trader, who was working on a UK bank holiday, had meant to sell a basket of stocks worth $58m (£45.6m) early in the morning but mistakenly typed the wrong numbers into the computer, triggering a sale of hundreds of stocks worth $444bn, according to the FCA.
Although Citi’s internal risk control systems stopped the bulk of the order, around $1.4bn (£1.1bn) crept through in the 14-minute period after the sell order was created before the trader realised the error and hit stop on the sale.
Owing to the flood of sell orders, the MSCI Europe index plunged 4pc.
The US bank was hit with a £27.8m penalty from the FCA and £33.8m from the Prudential Regulation Authority (PRA) over the incident.
Steve Smart, the FCA director of enforcement, said: “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.”
According to the FCA’s finding, a trader on Citi’s Delta 1 Desk, which offers complex financial products to large institutional investors, entered the value of the stocks they were selling in the wrong field.
They had intended to enter $58m in the “value” field but instead input 58m into the “quantity” field, leading to the sale of 349 stocks worth $444bn.
Citi’s internal data feed, which the trader would have relied on, was unavailable meaning the trader could not see the $444bn price tag for the order.
According to the FCA, they received a pop-up alert containing 711 warning messages but they could only see the first 18 of these and overrode the warnings before clicking ‘OK’ for the sale.
Citi’s risk systems automatically stopped the sale of more than 240 stocks worth $163bn but over the next few minutes more sales started firing across markets in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden and Switzerland.
Markets in the UK were closed when the incident occurred on May 2, a bank holiday in Britain, but European markets remained open.
The FCA said Citi had been too slow to escalate internal alerts about the erroneous trades.
A post-trade monitoring unit at Citi escalated the incident to the division responsible for some Delta 1 Desk trade 20 minutes after the trader cancelled the order, but only followed up with them four hours later.
The incident resulted in a $48m loss for Citi.
Citi said: “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. We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.”
