News release
The Prudential Regulation Authority (PRA) has fined Citigroup Global Markets Limited (CGML) £33,880,000 for failings in its trading systems and controls during the relevant period of investigation, being between 1 April 2018 and 31 May 2022.
The Financial Conduct Authority (FCA) has also imposed a financial penalty of £27,766,200 on CGML following an FCA investigation into related matters. The two regulators’ investigations, conducted in parallel, have resulted in a combined total financial penalty of £61,600,000.
The Firm agreed to resolve this matter, and therefore qualified for a 30% reduction in the amount of the financial penalty. Without this reduction, the amount of the financial penalty imposed by the PRA would have been £48,400,000.
Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, said:
“Firms involved in trading must have effective controls in place in order to manage the risks involved. During the relevant period, CGML failed to meet the standards we expect in this area, resulting in today’s fine.”
Throughout the relevant period, CGML received repeated supervisory communication from the PRA on the need to strengthen its trading controls. Notwithstanding this engagement and the remediation work CGML undertook during the relevant period, weaknesses in trading controls persisted.
The PRA expects firms to remediate identified issues promptly and completely. In this case, certain of the issues crystallised into trading incidents, the most significant of these occurring on 2 May 2022. In this instance, an experienced trader incorrectly inputted an order, resulting in US$1.4bn inadvertently being executed on European exchanges. Deficiencies in CGML’s trading controls contributed to this incident, in particular the absence of certain preventative hard blocks and the inappropriate calibration of other controls.
Following the trading incident on 2 May 2022, the PRA has required CGML to strengthen its trading controls. CGML has undertaken remediation work, taking steps to improve and strengthen its trading controls.
Rule breaches
The PRA found that CGML breached the following during the relevant period:
- PRA Fundamental Rule 2 (a firm must conduct its business with due skill, care and diligence);
- PRA Fundamental Rule 5 (a firm must have effective risk strategies and risk management systems);
- PRA Fundamental Rule 6 (a firm must organise and control its affairs responsibly and effectively);
- Rule 2.1(2) Algorithmic Trading of the PRA Rulebook (a firm must have in place effective systems and risk controls, suitable to the business it operates, to ensure that its trading systems are subject to appropriate trading thresholds and limits);
- Rule 2.1(3) Algorithmic Trading of the PRA Rulebook (a firm must have in place effective systems and risk controls, suitable to the business it operates, to prevent the sending of erroneous orders, or the systems otherwise functioning in a way that may create or contribute to a disorderly market);
- Rule 2.2(2) Algorithmic Trading of the PRA Rulebook (a firm must ensure that its systems are fully tested and properly monitored to ensure they meet the requirements of Rule 2.1 Algorithmic Trading of the PRA Rulebook).