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One Citi trader’s bungled inputting error sparked a flash crash in European shares

May 3, 2022, 11:54 AM UTC

Citigroup claimed responsibility for an error by one of its traders that sent some European markets plunging by up to 8% in the span of minutes on Monday.

What began as a 7.9% slide in Sweden’s benchmark OMX30 at 8:58 CET soon rippled across the entire bloc. Amsterdam-based pan-European bourse Euronext also tumbled 8%, while country bourses like Dutch AEX fell by around 3%, Belgium’s BEL20 fell by over 5%, and France’s CAC40 dropped 3%.

Citigroup said the flash crash—or the rapid fall in security prices in a very short timeframe—came from an inputting error, otherwise known by traders as a “fat-finger error.”

“This morning one of our traders made an error when inputting a transaction,” Citigroup said late Monday in an email statement. “Within minutes, we identified the error and corrected it.”

Reuters reported that the flash crash was caused by an erroneous calculation of a Nasdaq index involving Swedish companies, while the FT found the steep drops were caused by the bungling of trades on a number of shares that had Swedish names.

The indexes recovered throughout the day, albeit to levels slightly below open. Sweden’s OMX 30 recouped most of its losses to close 1.9% below its open. The regional Europe Stoxx 600 index, which slid as much as 3% at the height of the flash crash, trimmed its losses to around 1.5%.

At the peak of the flash crash, the error wiped €300 billion ($315 billion) off the market within minutes.

Flash crash

Nasdaq Stockholm, where the flash crash-triggering trade originated, said there was no need to reverse the Citi trade, seeing as a market participant caused the selloff, not a technical disturbance on its end.

“The reason for the drop was a sell event by a market participant. We have not identified any disturbances in Nasdaq’s systems,” a spokesperson for Nasdaq Stockholm said in an emailed statement before market close. “Furthermore, after a review, Nasdaq has not seen any reason to cancel trades that were made during this event.”

The mistake by Citigroup brings up unfortunate memories of a similar incident in 2020 when a trader who meant to send an $8 million interest payment to creditors of the cosmetics company Revlon erroneously transferred $900 million instead.

The bank was able to recoup a portion of the funds but was fined $400 million by U.S. regulators for failing to correct deficiencies in its risk and control systems. As part of the fine, it was also ordered by regulators to clean up its systems and upgrade its technology, which its chief executive Jane Fraser said was the bank’s top priority at an investor event in March.

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