The FCA has fined Citigroup Global Markets Limited (CGML) £27,766,200.

Failures in the firm’s systems and controls led to the unintended sale of $1.4 billion in equities across European markets.

On May 2, 2022, a CGML trader intended to sell a basket of equities worth $58 million. However, an input error resulted in the creation of a basket valued at $444 billion. CGML controls managed to block $255 billion of this basket, but the remaining $189 billion was sent to a trading algorithm. This algorithm was programmed to sell portions of the total order throughout the day.

Before the trader could cancel the order, $1.4 billion in equities had been sold on European exchanges, causing a brief but significant drop in some European indices.

Although parts of CGML’s trading control framework functioned as expected, several key controls were either missing or inadequate. Notably, there was no failsafe to entirely block the erroneous basket from reaching the market. Additionally, the trader could override a critical pop-up alert without thoroughly reviewing its contents. Ineffective real-time monitoring further delayed the escalation of internal alerts regarding the erroneous trades.

Steve Smart, joint executive director of enforcement and market oversight at the FCA, stated, “The FCA expects firms engaged in trading activities, including algorithmic trading, to have effective systems and controls to prevent such errors. These failings led to over a billion pounds of erroneous orders being executed and risked creating a disorderly market. We expect firms to review their controls and ensure they are adequate for the speed and complexity of financial markets.”

CGML did not contest the FCA’s findings and agreed to settle, thereby qualifying for a 30% discount on the financial penalty. Without the discount, the FCA would have imposed a penalty of £39,666,000.

Additionally, on May 22, 2024, the Prudential Regulation Authority (PRA) levied a £33,880,000 penalty on CGML following its investigation into related issues.