The company failed to implement certain rules related to Market Abuse Regulation (MAR), for the detection and monitoring of potential market abuse, including insider trading and market manipulation
Citigroup fails to monitor market abuse. (Credit: Kanchanara on Unsplash)
The UK’s Financial Conduct Authority (FCA) has fined Citigroup Global Markets £12.5m for violating the Market Abuse Regulation (MAR).
According to FCA, the company failed to implement certain rules related to MAR, for the detection and monitoring of potential market abuse, including insider trading and market manipulation.
MAR was introduced in 2016, and its requirements were expanded to monitor both orders and trades to detect potential market abuse across wide range of markets and financial instruments.
FCA said that broker-dealer failed to effectively implement the new requirement, and could identify and assess the specific market abuse risks only after 18 months.
The company’s improper implementation resulted in significant gaps in its arrangements, systems, and procedures for additional trade surveillance, said the British regulator.
FCA enforcement and market oversight executive director Mark Steward said: “The framework for market integrity depends on the partnership between the FCA and market participants using data to detect suspicious trading.
“By not fully implementing the new provisions when required, Citigroup Global Markets did not carry its full weight in this partnership, impacting market integrity and the overall detection of market abuse.”
Citigroup’s European trading hub had ignored potentially abusive transactions in nearly 900,000 trades processed every day at the bank’s Canary Wharf headquarters.
The bank failed to implement proper measures for at least two years, during which period traders generated around £2.6bn in revenue, according to the FCA report.
Its internal compliance teams found that their surveillance systems failed to track almost half of the trading risk that can be categorised to be second-most serious.
The UK regulator said that its personnel couldn’t monitor abusive trading activities for potential insider dealing and spoofing until early 2018.
The company has agreed to resolve the case and is eligible for a 30% discount on the fine, which would have been around £18m without the discount.