Citi trader exacerbated October sterling ‘flash crash’

UK investigation into spiralling pound focuses on Citigroup’s Japanese operations

October’s flash crash saw the British pound slide 9% in value in 40 seconds. Photographer: Joe Giddens/PA Wire

October’s flash crash saw the British pound slide 9% in value in 40 seconds. Photographer: Joe Giddens/PA Wire

 

The UK investigation into October’s “flash crash” in sterling has focused heavily on the Japanese trading operations of Citigroup, which fired off repeated sell orders that exacerbated the pound’s fall, according to bankers and officials involved in the inquiry.

Citi’s traders are not believed to have started the slide in the currency in thin Asia trading, but its Tokyo desk played a key role in sending the pound to its lowest levels in 31 years, bankers and officials said. The value of the pound fell from $1.26 to $1.14, with a 9 per cent slide in about 40 seconds.

The Bank of England has said publicly that the October 7th crash is “set apart by the lack of a clear fundamental trigger”, though its investigation of the event focused on a single incident, according to a person briefed on the probe.

People with knowledge of events at Citi that day said one of the US bank’s traders placed multiple sell orders when the currency slumped in unusually fragile market conditions. One source said the trader “panicked”.

Citi said in a statement that it “managed the situation appropriately and our systems and controls functioned throughout the period”. It declined to say whether anyone had been disciplined or whether it had changed any trading practices in light of the incident.

Copyright The Financial Times Ltd