Wed, Jun 12, 2019 - Page 10 News List

Citigroup suspended from JGB auctions for spoofing

MANIPULATION:A Citigroup trader placed orders for Japanese government bonds without intending to execute them, misleading other investors in the market

Bloomberg

Citigroup Inc was suspended from the primary group of dealers that participate at certain Japanese government bond (JGB) auctions after it was found to have manipulated futures prices.

The Japanese Ministry of Finance ordered Citigroup Global Markets Japan Inc’s exclusion from participating in “non-price competitive auctions” and certain other government bond sales for a month from tomorrow, it said in a statement yesterday.

The suspension comes days after the Japanese Financial Services Agency fined the firm ¥133 million (US$1.2 million) and ordered it to improve internal controls for failing to detect instances of manipulation of the Japanese government bond market.

Citigroup was found to have placed orders in October last year for JGB futures contracts without intending to execute them, a practice known as spoofing.

“The company had deficiency in trade surveillance related to market transactions of derivatives,” the ministry said.

The orders, placed at the Osaka Exchange by an employee of London-based Citigroup Global Markets Ltd, misled other investors into believing that the 10-year JGB futures market was “thriving,” the Japanese Securities and Exchange Surveillance Commission said in March.

Primary dealers are given access to finance ministry officials in return for an obligation to bid for and purchase a certain amount of government bonds at each auction.

There are 21 of them, including Citigroup, according to the ministry’s Web site.

A Tokyo-based Citigroup spokeswoman was not immediately able to comment.

The firm last week said that it would take “swift actions” to meet the regulator’s order.

Mitsubishi UFJ Financial Group Inc’s securities venture with Morgan Stanley was last year suspended from the group for a month for a similar breach.

It was also dropped from underwriting several bond sales.

Citigroup is ranked 12th among underwriters of Japanese corporate bonds over the past 12 months, data compiled by Bloomberg show.

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