Citigroup Global Markets Australia was fined A$30,000 by regulator the Australian Securities and Investment Commission (ASIC) for an incorrect priority crossing order that resulted the share price of a stock falling by 99%.
A trader for Citigroup Global Markets Australia entered a sell order on the Australian Securities Exchange (ASX) for 119,231 shares of Fantastic Holdings Limited (FAN) at $0.024 instead of the correct price of $2.40 on 20 May.
The order transacted with 20,732 FAN shares in the bid schedule at prices between $1.71 and $2.32 before Citigroup crossed the residual 98,499 shares at $0.024, which sunk the share price by 99% from $2.42 to $0.024.
Findings released by ASIC show the trader in question was using a new computer that was not yet configured with pre-set limits or warnings that would have triggered an alert and prevented the order going to market.
Citigroup contacted ASX Market Control within 80 seconds of the error to acknowledge the mistake and allow the ASX to go about cancelling the resulting trades at the incorrect price.
The market watchdog found that the Citigroup error breached ASIC Market Integrity Rule 5.9.1 – which relates to anything that causes a market for a product not being fair and orderly.
According to ASIC’s findings, Citigroup did not derive any benefit from the mistake and co-operated with the regulator in resuming normal trading in FAN shares.
ASIC also noted that the error was inadvertent on the part of the trader, and not deliberate or reckless, but appropriate care was not taken in entering the order.
Citigroup’s Australian arm made a similar error on 15 October 2008 for which they were also fined A$30,000 after a trader entered an order to cross 160,000 shares of James Hardie Industries on the ASX at $1.85 instead of $4.85.
This resulted in 71,329 Hardie shares crossed at $1.85, and the share price fell 61.86% from $4.85 to $1.85, and after the ASX was notified, a total of 19 trades were cancelled.