FT with an article on the GBP flash-crash investigation 7 Dec..
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. GBPUSD fell from 1.26 to 1.14, with a 9% slide in about 40 seconds.
The Bank of England has said publicly that the October 7 crash is «set apart by the lack of a clear fundamental trigger» but 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 of the people 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.
But people involved in the investigation said the second stage of the slide coincided with a large number of rapid-fire sell orders placed in Tokyo by a Citi trader using an «Aggregator», which sends trade instructions into a range of trading venues.
The Bank for International Settlements, which monitors global money flows, is working on its own detailed report on the crash, with input from the BoE, to be released in January.