Electronic bond network MTS has suspended Citigroup Global Markets from trading for one month, a penalty for its role in disrupting the European bond market through a contentious €11 billion trade in August of last year.
The Italian electronic trading platform’s appeals committee, known as the “Wise Men,” agreed on the one-month ban after ruling that Citigroup’s actions “lacked professionalism in not sufficiently considering how the trade would affect the MTS market,” the group said in a statement.
On August 2, 2004, Citigroup purchased 66,214 futures contracts on Eurex, and in 18 seconds sold €11.3 billion of bonds on MTS, a volume equivalent to the average daily trading on that platform. Citigroup also sold about €1.5 billion in bonds in other domestic cash markets, resulting in a trade of €12.9 billion in bonds.
The sale left Citigroup with an unanticipated short position, which was closed out at 11.25 though the purchase of €3.8 billion in bonds on MTS, securing the bank a lower price for some of the bonds it sold earlier. MTS says the move forced a brief but clear disruption for MTS, causing sharp falls in bond prices, erratic trading volumes, and the withdrawal of some participants quoting on the platform.
The profit for Citigroup reached $18.2 million.
Citigroup continues to hold that its August trade did nothing to shake the market.
“While we regret some of the finds of their decision, the Committee did note that there was ‘no major disruption in the functioning of the market on the day of the trade’ and found no evidence that Citigroup deliberately attempted to disrupt the market,” Citigroup said in a statement.
MTS’s penalty comes nearly five months after the FSA fined Citigroup £13.9 million for its role in the affair, faulting the bank for “failing to conduct business with due skill, care and diligence and failing to control its business effectively.”
The suspension will begin on November 1.