Citigroup's “Fat Finger” trading mistake in 2022 caused the European stock market value to evaporate at one point by $322 billion, and the total cost of this act reached about 130 million US dollars.
On Tuesday, Citigroup was fined $78 million by British regulators for a “fat finger” transaction mistake. It is reported that this is one of the biggest fines issued by the UK for violating control measures since the 2008-2009 global financial crisis.
The incident dates back to May 2022. At that time, this mistake triggered a flash crash in the European stock market, and the market capitalization once evaporated by 322 billion US dollars. The OMX Stockholm 30 Index experienced a five-minute sell-off, which affected major exchanges from Paris to Warsaw. According to foreign media reports, the deal was to hedge the bank's risk exposure to the MSCI Global Index.
The UK Financial Conduct Authority (FCA) issued a statement on its official website saying that on May 2, 2022, a Citigroup trader in London intended to sell a basket of shares worth 58 million US dollars, but made an input mistake when entering instructions, which led to the creation of a basket of shares worth 444 billion US dollars.
Citigroup's trading system issued a warning and blocked most transactions, but not all of them. Of these, approximately $1.4 billion of transactions were executed, leading to massive sell-off of European stocks on various European exchanges.
The FCA stated in its latest statement that Citigroup's system design was flawed and the real-time monitoring mechanism was “ineffective”, leading to erroneous transactions being passed.
The UK Prudential Regulation Authority (PRA) said on Wednesday: “The direct cause of a trade error was a trader's manual input error. The error was not discovered by Citi's risk department, which monitors transactions in real time, but by traders about 15 minutes after the transaction entered the system.”
Citi did not dispute the supervisors' findings and agreed to settle the charges. The bank said it was happy to resolve the matter. “This was due to personal error, which was discovered and corrected within a few minutes. We are taking immediate steps to strengthen our systems and controls and remain committed to ensuring full compliance with regulations.”
In addition to fines of 78 million US dollars by UK regulators, Citi also lost about 50 million US dollars due to this transaction, bringing the total cost of this “fat finger” transaction to about 130 million US dollars.