Latest word from the FCA after a rogue trader made a keyboard slip, due to poor software design and pop-ups etc. and over $180 billion in shares were sold by an algorithm. There is a very serious lesson here for insurance brands moving money on screen too, especailly when settling large scale claims.
The Financial Conduct Authority (FCA) has fined Citigroup Global Markets Limited (CGML) £27,766,200 after failures in the firm’s systems and controls led to US$1.4 billion of equities being sold in European markets when they should not have been.
On 2 May 2022, a CGML trader had intended to sell a basket of equities to the value of US$58 million. The trader made an inputting error while entering the basket in an order management system. This resulted in a basket to the value of US$444 billion being created.
CGML controls blocked US$255 billion of the basket progressing but not the remaining US$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 US$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.
While parts of CGML’s trading control framework operated as CGML 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.
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 erroneous trades.
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