Osaka Exchange imposes JPY20m fine on Citigroup Global Markets Japan

Maria Nikolova

An investigation has shown that the company accepted and executed orders of spoofing transactions in the 10-year JGB futures market.

Osaka Exchange, Inc. has imposed a fine of JPY 20 million on Citigroup Global Markets Japan Inc. and has requested that the company submit a business improvement report.

During market surveillance in the OSE market, Japan Exchange Regulation (JPX-R) has detected activity suspected to constitute market manipulation (spoofing) with respect to trading of Japanese government bond futures entrusted by Citigroup Global Markets Limited (CGML), a UK-headquartered company, to Citigroup Global Markets Japan Inc, an OSE Trading Participant, and explained the details of the situation to Citigroup Global Markets Japan Inc in November 2018. Thereafter, JPX-R analyzed the suspected trading in detail and reported the results of the investigation to the Securities and Exchange Surveillance Commission (SESC).

Based on the report from JPX-R, the SESC investigated the case in detail, and then determined that the suspected trading falls under market manipulation that is prohibited by the Financial Instruments and Exchange Act (FIEA). On March 26, 2019, the SESC recommended the Financial Services Agency (FSA) to issue an Administrative Monetary Penalty Payment Order. On June 7, 2019, the FSA ordered CGML to pay an administrative monetary penalty of JPY 133.37 million.

The SESC conducted an inspection on Citigroup Global Markets Japan Inc with the base date on November 26, 2018 and deemed that the company had committed a legal violation (by having a deficiency in trade surveillance related to market transactions of derivatives) based on the results of the inspection. On April 19, 2019, the SESC recommended that the FSA impose administrative disciplinary action against the Company. On June 7, 2019, the FSA imposed said action against the company.

Citigroup Global Markets Japan Inc uses a trading system that was jointly developed by the U.S. headquarters of Citigroup Inc. and an external vendor for market transactions of derivatives. Due to failures in programming of this system, some data from transactions conducted through this trading system (such as those pertaining to manually-operated bulk cancel orders and sliced orders of algorithmic trading) were not delivered to the company’s trade surveillance system; therefore, the the company inadequately failed to cover these transactions in its trade surveillance.

Further, the company has been found to have inappropriately narrowed down the scope of trade surveillance in its trading surveillance system settings. Specifically, when setting thresholds for extracting spoofing transactions, the persons in charge inappropriately shortened the time-period between the order placement and cancellation. This was done without any prior verification internally on the rationality for setting thresholds that take into account various factors, including the size of transactions.

In addition, due to faulty trade surveillance system settings, the company’s trade surveillance failed to cover the transactions executed during night sessions on days that preceded non-business days.

Although the company was aware that a number of alerts for suspicious market fraud were concentrated on a single trader, the company failed to take any thorough actions, such as close investigation into the intention of such transactions and scrutinizing the transaction data.

It was determined that Citigroup Global Markets Japan accepted and executed orders of spoofing transactions in the 10-year JGB futures market committed by Citigroup Global Markets Limited and inadequately overlooked such market frauds.

Read this next

Industry News

Playtech to close Finalto sale to Gopher in two weeks

Playtech, the London-listed gambling software developer, today said it expects to close the divesting of its financial trading division Finalto by mid July 2022.

Retail FX

eToro valuation halved as SPAC merger deadline expires

The deadline for the completion of the SPAC merger of eToro had passed yesterday, June 30, and the Israeli broker apparently canceled the deal with Betsy Cohen-backed blank-check firm.

Institutional FX

FXSpotStream reports second best figure for monthly volumes

Trading volumes on institutional FX platforms surged in June after fears over the impact of Russia’s military invasion of Ukraine sent speculative asset classes reeling.

Retail FX

Vantage expands MT5 offering with access to new stocks

ASIC-regulated foreign exchange brokerage Vantage has expanded its service offering and trading products by incorporating new markets, namely 14 exchange-based stocks on MetaTrader 5.

Digital Assets

CFTC charges $1.7 billion Bitcoin scam, largest to date

Mirror Trading accepted at least 29,421 Bitcoin from approximately 23,000 investors from the United States and even more throughout the world.

Retail FX

Spotware Systems upgrades cTrader Desktop to version 4.3

Spotware Systems, a technology provider for the electronic trading industry, has launched an updated version of its cTrader Desktop, which adds new functionality to join a roster of advanced trading capabilities.

Digital Assets

OKX launches Block Trading for tighter pricing

With Block Trading, users can integrate spot and derivatives trades on the same platform and trade multiple currencies in a single trade. The service supports trading of perpetual swap, futures, and option contracts with popular altcoins as the underlying.

Industry News

Interactive Brokers pays $1 million to settle with CFTC

Interactive Brokers overcharged its customers a total of $710,828.14.

Metaverse Gaming NFT

DappRadar launches cross-chain token staking

The launch of the cross-chain token staking mechanism by DappRadar comes under a partnership with LayerZero protocol, which enables smart contracts to communicate across different chains.