Citi trader made error behind flash crash in Europe stocks

Citigroup is in talks with regulators and exchanges about Monday’s incident, according to a person familiar with the matter who asked not to be named discussing non-public information.

A spokesman for Nasdaq Stockholm had said the short-lived slump wasn’t a technical glitch on its part.

“Our first priority was to exclude technical issues in our systems, and our second priority was to exclude an external attack on our systems,” said David Augustsson, a spokesman for Nasdaq Stockholm. “It is very clear to us that the cause of this move in the market is a very substantial transaction made by a market participant.”

The OMX Stockholm 30 Index closed 1.9% lower, roughly in line with a drop in European markets. It had slumped as much as 8% in just five minutes before recovering most of the losses shortly after.

Source: Bloomberg

The error could potentially cause monetary and reputational damage to Citigroup as Nasdaq said it will not cancel any trades made on the Nordic markets. Joakim Bornold, savings economist at Soderberg & Partners, said that equity markets can be very sensitive to erroneous trades despite safeguards.

The incident came days after the U.S. Office of the Comptroller of the Currency lifted a 10-year-old consent order with Citigroup in a victory for Fraser, who’s dedicated thousands of employees to improving risk and controls systems. The bank is still working to address two other consent orders with the OCC and the Federal Reserve stemming from 2020.

“It’s dramatic, but then the modern market structure also means that markets can correct quickly,” said Anish Puaar, European market structure analyst at Rosenblatt Securities.