Japan’s FSA takes administrative action against Citigroup Global Markets Japan Inc

Maria Nikolova

The action is taken in response to failures in Citi’s trade surveillance system.

Japanese authorities have taken action against Citigroup Global Markets Japan Inc over failures in its trade surveillance system.

The Securities and Exchange Surveillance Commission (SESC) conducted an inspection of the company, and has determined that the company violated a set of laws and ordinances. On April 19, 2019, the SESC recommended that the Financial Services Agency (FSA) takes administrative action against the company. Considering this recommendation, the FSA today (June 7, 2019) issues an administrative action against Citigroup Global Markets Japan based on Article 51 of the Financial Instruments and Exchange Act (FIEA’).

The company operates trade surveillance leveraging market derivatives trading control system that was jointly developed by the U.S. headquarters of Citigroup Inc. and external vendors. Due to failures in this system, some transaction data necessary for trade surveillance (such as the data manually operated in pull order cancel, and the data leveraged split execution order strategy in the form of algorithmic trading) were not delivered to trade surveillance system. That is why the regulator concluded that the company failed to cover these transaction in its trade surveillance.

Further, the company has been found to have inappropriately narrowed down the coverage of trade surveillance. In terms of setting threshold for extracting spoofing transactions, the company inappropriately shortened the time-period between the order and the cancellation, without conducting any internal verification of the rationality of the setting threshold embedding a lot of factors including the size of market derivative transactions.

In addition, due to a failure in setting of trade surveillance system, the company’s trade surveillance failed to cover market derivative transactions executed in the evening trading markets.

Also, despite the fact that the company recognized a lot of alerts for suspicious market frauds intensified towards a single trader, it failed to take any thorough actions, such as close investigation into the intention of transactions, and scrutinizing the data of transaction. Under this trade surveillance framework, the company overlooked and executed orders of the spoofing transactions in JGB futures market committed by Citigroup Global Markets Limited.

The FSA today issues a business improvement order against Citigroup Global Markets Japan. Under the order, the company will have to enhance and strengthen its business management/internal control framework (including necessary cooperation with global and other foreign branches/subsidiaries to comply with laws and regulations in Japan). The company is also expected to rebuild firm-wide compliance and sound business culture.

Further, the company will have to set up/fully implement an improvement plan and preventive measures in line with it.

The company will have to submit the first written report about the situation and results of the review to the FSA as of July 5, 2019.

The action by the Japanese regulator is announced just a day after Citi was fined CHF 28.5 million by Switzerland’s Competition Commission (COMCO) over anti-competitive practices in the Forex market. Traders of several internationally active banks – Barclays, Citigroup, JPMorgan, MUFG Bank, Royal Bank of Scotland (RBS), and UBS, have partially coordinated their conduct in two separate cartels in foreign exchange spot markets regarding certain G10-currencies (USD, EUR, GBP, JPY, AUD, NZD, CAD, CHF, NOK, SEK), the Swiss regulator has found.

Read this next

Retail FX

eToro is latest platform to suspend Terra’s LUNA, Binance resumes trading

Israeli social trading network eToro has become the latest platform to suspend trading on the Terra (LUNA) cryptocurrency in light of a market-wide downturn.

Industry News

UK court allows ThinkMarkets’ “obscure” B-book claims against IS Prime

“The Judge added that “Think did need to address the concerns expressed” as its counterclaim “suffers from a lack of detail, obscurity and potential inconsistency”.

Retail FX

Brazilian Broker XP launches crypto trading to 3.5M users

XP Inc (XP.O) is set to launch a crypto trading platform, dubbed ‘XTAGE’, as Brazil’s largest broker is looking to tap into the growing interest in trading bitcoin and other digital assets.

Retail FX

easyMarkets adds MT5 as demand for platform continues to grow

easyMarkets has joined a growing group of brokers in switching over to MetaTrader 5 (MT5), becoming the latest retail platform to incorporate the platform into its live trading infrastructure.

Institutional FX

SGX’s FX volume shines in a largely lackluster April

The Singapore Exchange (SGX) notched a healthy gain in its FX and indices volumes, despite seeing a wavering performance across commodity and securities segments.

Industry News

Devexperts webinar: Attracting retail traders with fractional trading

Following the successful webinar on introducing crypto to retail investors, Devexperts is returning to host a new one about fractional trading. 

Digital Assets

Relai to launch bitcoin debit card to unlock BTC via every purchase

To attract more retail investors to the crowdfunding project, Relai has promised 0% fees on transactions on the Relai app for those who invest €5,000 or more.

Digital Assets

Amid crypto meltdown, Tether reduces corporate debts in USDT reserves

Tether, which is closely affiliated with crypto exchange Bitfinex, has drastically reduced its holdings of commercial debt in its reserves over the last six months. Instead, the stablecoin issuer allocated most of its non-fiat reserves to Treasury bills, almost doubling assets in short-term government securities.

Industry News

TrustPay launches SEPA instant payments

” Our clients will now be able to make instant transactions with the immediate settlement of funds, which makes business more effective in today’s fast world.”

<