A transaction error probably led to a price slide.
(Photo: dpa)
London It is now clear who is responsible for the flash crash on the European stock market on Monday: Wall Street bank Citigroup. In a statement, the US bank announced that one of its London traders made a mistake in a transaction, triggering the price slide. “Within minutes we identified the error and corrected it,” Citi said.
On Monday morning, a sharp fall in prices had temporarily caused a stir: A whole package of mainly Swedish shares came onto the market as a complete surprise. At times, the stock exchange in Stockholm went down by up to eight percent.
In Denmark, the leading index fell more than six percent. The flash crash was also felt in the Netherlands, Belgium and France. The Euro Stoxx 50 lost up to three percent and stopped trading for a short time. In just a few minutes, 300 billion euros were destroyed. The stock markets calmed down again on Tuesday.
A spokeswoman for the US stock exchange operator Nasdaq, which also operates the Stockholm Stock Exchange, announced shortly thereafter: “The reason for the slump was a sale by a market participant.” Malfunctions in the Nasdaq systems were not found. Citi has now entered into talks with regulators after the incident, according to financial service Bloomberg, citing a person familiar with the matter.
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However, the mistake could not only damage the already tarnished reputation of the bank, but also have financial consequences for Citi: The stock exchange operator Nasdaq said that after the review it saw no reason to cancel the deals made during the event. In 2009, an oil trader’s mistake resulted in $10 million in losses. Three years later, the investment firm Knight Capital paid $440 million for a computer error.
Citigroup has a long bug list
It’s not the first time Citigroup has had bad trades. Two years ago, the US bank paid a $400 million fine for inadequate security. Previously, the Citi bankers had accidentally transferred $900 million to the bondholders of the cosmetics group Revlon. Actually, the institute only wanted to transfer interest payments of eight million dollars. Not all recipients wanted to return the money to Citi, however. A costly legal battle ensued.
Citigroup boss Jane Fraser is coming under even more pressure as a result of the recent incident to bring the bank’s often-criticized risk management into shape. When she took office in 2021, the banker declared a security upgrade for the financial colossus to be her most important goal.
Criticism of the complexity of the bank and its often opaque structures has accompanied the financial institution since it was founded. For a long time, Citi was considered “unmanageable”. Citigroup was formed in 1998 from the merger of Citicorp Bank and the insurance group Travelers.
With agency material
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