British financial regulators have fined Citigroup £61.7 million over a $444 billion fat finger error that led to a $1.4bn sell off of equities in European markets.
The Citi trader had intended to sell a basket of equities to the value of $58 million, but instead inputted an erroneous $444 billion value, equivalent to the GDP of Denmark.
Citi's trading system blocked $225 billion of the basket progressing, but not the remaining $189 billion which was sent to a trading algorithm. The algorithm selected was designed to place portions of this total order to be sold in the market over the rest of the day.
In total $1.4 billion of equities were sold across European exchanges, before the trader cancelled the order. This coincided with a material short-term drop in some European indices which lasted a few minutes.
The FCA's investigation into the incident found that while parts of Citi's trading control framework operated as expected, some primary controls were absent or deficient. 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 says that due to poor design, the trader was also able to manually override a pop-up alert, without being required to scroll down and read all the alerts within it. The firm’s real-time monitoring was ineffective, which meant that it was too slow to escalate internal alerts about the fat finger trades.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, says: "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."
The FCA's £27.8 million penalty qualified for a 30% discount as Citi did not dispute the findings. The US bank has also been hit with a £33.88 million fine by the Prudential regulatory Authority following its own investigation into the incident.