Alpari (US) files lawsuit against Citigroup over Last Look practices

Maria Nikolova

Alpari (US) claims that from January 1, 2008 to June 30, 2016, Citigroup “used Last Look to reject millions of trades that would have been otherwise executed but for Citigroup reneging on its matched orders”.

Another lawsuit related to the controversial “Last Look” practice in the FX market has been filed in the United States.

Lawyers for Alpari (US) LLC have earlier this week filed a case against Citigroup Inc (NYSE:C) and Citibank at the New York Southern District Court. The Complaint, seen by FinanceFeeds, states that the case is a class action brought to recover the damages that the plaintiffs suffered as a result of the alleged practice of Citigroup of reneging on orders that it matched and accepted through its own and third-party electronic trading platforms.

The class members include “all persons in the United States who, between January 1, 2008 and June 30, 2016 (the “Class Period”), placed an order either on a Citi proprietary platform or a third party ECN that (1) was matched to Citigroup’s streaming price; (2) was rejected by Citigroup; and (3) was subsequently filled at a price less favorable than the original Citigroup price to which it was matched.”

  • Proprietary platforms

According to the Complaint, when dealing with Plaintiff and the Class, Citigroup programmed an unnecessary delay of up to several seconds into its execution algorithms. This delay has been dubbed the Last Look period. The plaintiffs allege that Citigroup first used Last Look on CitiFX at least as early as January 1, 2008, and on Velocity beginning with its launch in 2009. The complaint also states that on CitiFX, Velocity, and the rest of the Citi proprietary platforms, Citigroup further applied Last Look to all API/FIX and ECN trades, as well as a portion of those customers using Citigroup’s GUI.

In addition, Citigroup is alleged to have used the information derived from the order (quantity, buy or sell, etc.) to its trading advantage. Also, Citigroup is accused to have “significantly and artificially increased its FX trading profits at the expense of buy-side counterparties”.

  • ECN “hostages”

The plaintiffs’ complaint alleges that Citigroup used the same Last Look practices on third-party ECNs. The document says that although buy-side market participants can (and do) execute trades directly with each other on ECNs, Liquidity Providers, such as Citigroup, still act as counterparties in most FX trades executed on ECNs. According to the Complaint, as a condition of providing liquidity to ECNs open to buy-side market participants, Citigroup required ECNs to permit it to use Last Look when trading through those platforms.

“Granting such concessions to Liquidity Providers, such as Citigroup, was essential to any start-up ECN’s economic survival: ECNs were hostage to Citigroup’s demands.”

Importantly, Alpari (US) admits that it has no access to the underlying facts relating to Citigroup’s alleged improper activities. The plaintiffs note in their complaint that they believe further evidentiary support for their allegations will come to light after a reasonable opportunity for discovery.

The Complaint mentions similar cases involving “Last Look” practices, including the events from 2015. In March 2015, it was reported that the Department of Justice and the Securities and Exchange Commission asked Barclays for information relating to BARX and its Last Look practices. In November 2015, Barclays entered into a Consent Order with the New York State and Department of Financial Services. The bank admitted it used Last Look, agreed to pay a $150 million civil monetary penalty, as well as to terminate a Managing Director and Global Head of Electronic Fixed Income, Currencies, and Commodities Automated Flow Trading.

The plaintiffs in the case ALPARI (US), LLC v. Citigroup, Inc et al, are, inter alia, seeking that the Court award Plaintiff and Class members damages, punitive damages, and/or restitution in an amount to be determined at trial.

Alpari (US) LLC was dissolved in September 2015.

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