According to people with knowledge of the matter, Citigroup Inc. may lose $50 million following a fat finger trade by one of its staff in London that caused a crash in the European stocks in May.
The bank is still reconciling losses caused by the mistaken trade, and according to one of the people asking not to be identified as this private matter, the final figure could balloon higher.
What actually happened?
A trader in the company’s Delta One Trading division in London erroneously added an extra zero to a trade order in the early hours of the European market while working from home on May 2, which was a bank holiday.
The OMX Stockholm 30 Index saw a five-minute sell-off caused by the blunder. It wreaked havoc across stock markets stretching from Warsaw to Paris and wiping off nearly $322 billion (300 billion Euros) at one time.
The Citibank staff who made a mistake has been placed on leave while the bank reviews the incident. According to one of the people, Citibank has attributed the error to a human error and not to the fact that the staff was remote working from home.
A spokeswoman declined to comment on the bank’s behalf.
The error has caused a significant blow to the bank’s CEO, Jane Fraser, and to the equity chief of Citibank, Fater Belbachir, who was looking to increase the revenue from stock trading for the bank. In 2021, Citibank earned $4.55 billion from equity trading, a growth of 25% over the previous year.
Trading products from Delta One allows clients to take positions in hedging or bet on directional moves in the derivative segment or from the basket of securities. Using Delta One’s trading strategies is less costly than exploring all the stocks involved.
The Citibank system usually breaks up large trade orders into smaller bets automatically. The internal algorithms of the bank stopped small blunders, and other trades were allowed to go through. The bank is investigating why the algorithms were programmed so that the system permitted mistaken trades, according to one of its people,
Citibank has been talking to the exchanges and regulators regarding last month’s incident. The bank is overhauling its systems and internal technologies to improve its internal controls, which is a part of the consent orders it had agreed upon with the U.S regulators in 2020.
