Citigroup Inc faces a ￥133 million (US$1.2 million) fine for allegedly manipulating prices in the Japanese government bond (JGB) futures market, its latest regulatory setback in Asia.
Japan’s securities watchdog said Citigroup in October last year placed orders for JGB futures contracts at the Osaka Exchange without intending to execute them, a practice known as spoofing.
The Japanese Securities and Exchange Surveillance Commission recommended that the Japanese Financial Services Agency impose the fine on Citigroup Global Markets Ltd.
The allegation put another spotlight on Citigroup’s trading in markets in Asia, where it has a major presence.
In Hong Kong, the US bank ousted eight equities traders following an investigation into whether staff properly disclosed the bank’s financial interest when facilitating stock trades, people familiar with the matter said last week.
An employee of London-based Citigroup Global Markets placed large buy and sell orders outside of Japan trading hours that were not executed, misleading other investors into believing that the 10-year JGB futures market was “thriving,” the commission said in a statement yesterday.
The watchdog reports to the agency, which usually carries out its recommendations.
APOLOGY
“Citi takes the recommendation seriously and apologizes for any inconvenience or concern the conduct that gave rise to today’s recommendation may have caused,” the New York-based company said in a statement.
It pledged to enhance governance and internal controls.
The accusation bears similarities to a case involving Mitsubishi UFJ Financial Group Inc’s joint venture with Morgan Stanley, which was found to have manipulated JGB futures prices last year.
As well as receiving a ￥218 million fine from the agency, Mitsubishi UFJ Morgan Stanley Securities Co was suspended from a key group of JGB dealers and dropped from managing several bond sales, hurting its reputation and fee income.
Citigroup is ranked 13th among underwriters of Japanese corporate bonds for the fiscal year ending on Sunday, data compiled by Bloomberg show.
Local unit Citigroup Global Markets Japan Inc is among 21 primary dealers in the JGB market that participate in bond auctions and exchange information with Japanese Ministry of Finance officials, according to the ministry’s Web site.
The Wall Street firm had another regulatory setback in Asia.
In India, it decided against seeking a new term for local chief Pramit Jhaveri after the central bank signaled that it would not approve an extension, Bloomberg reported last month.
The Reserve Bank of India’s decision stemmed from personal investments by Jhaveri, a person with knowledge of the matter said.
In the US, Citigroup was fined US$25 million in 2017 after regulators found that five of its traders manipulated the US Treasury futures market more than 2,500 times.
The fine was the biggest spoofing settlement on record at the time.
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