|Tuesday, March 17, 2009
Nancy Condon (202) 728-8379
Herb Perone (202) 728-8464
Washington, DC — The Financial Industry Regulatory Authority (FINRA) announced today that it has imposed a $2 million fine against Citigroup Global Markets for the erroneous publication of non-bona fide quotations and transactions at and around the NASDAQ market opening on a Quadruple Witch Expiration Friday; systemic Order Audit Trail System (OATS) reporting violations; fixed income transaction reporting violations; limit order display violations; and, related supervisory failures. These violations occurred in 2006 and prior years.
FINRA found, as a result of a referral from the NASDAQ's MarketWatch Department, that Citigroup failed to properly monitor certain of its trading systems at the opening on June 17, 2005, a Quadruple Witch Expiration Friday. Quadruple Witch Expiration Fridays occur once each quarter, when stock index futures, index options, stock options, and options on stock index futures simultaneously expire.
These system failures resulted in the erroneous publication of approximately 6,800 non-bona fide transactions in more than 170 securities that the firm ultimately cancelled via Clearly Erroneous Petitions. The systems failures also resulted in the publication of thousands of non-bona fide quotations, which triggered executions by other firms at prices unrelated to the market value of the securities, requiring those firms to petition to cancel over 1,400 trades.
"Firms must establish and maintain operational controls and supervisory systems reasonably and effectively designed to ensure that their trading systems function correctly, especially on expiration days when price discovery is particularly important," said Tom Gira, Executive Vice President of FINRA's Market Regulation Department.
FINRA further found that Citigroup did not report approximately 6 million orders to OATS between Aug. 1, 1999 and July 10, 2006. From July 2002 through September 2006, Citigroup inaccurately reported or failed to report over 300,000 transactions to FINRA's Trade Reporting and Compliance Engine (TRACE) and inaccurately reported or failed to report more than 480,000 transactions to the Municipal Securities Rulemaking Board.
In concluding this settlement, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2008, members of the public used this service to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through comprehensive regulation. FINRA touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and firms.
For more information, please visit our Web site at www.finra.org