The SEC keeps a close eye on all financial service providers. That is only normal, as companies try new things which or may not backfire. In the case of Citigroup Global Markets, the team has misled users regarding a dark pool operated by one of its affiliates. This news has come to light during a recent probe.
Citigroup users were made aware of a dark pool. In the financial world, dark pools are often used to provide additional trading liquidity without disrupting order books. This pool trades in Ciit Match and is operated by Citi Order Routing and Execution. Two of the project’s most active users executed massive amounts of trades, which raises a lot of questions by the SEC.
Foul Play by Citi Comes to an End
To make matters worse, Citi failed to disclose close to half of Citi Match orders were routed to and executed by other trading venues. This includes dark pools and service providers not offering the same premium features as Citi match. Furthermore, Citigroup sent trade confirmations to certain users to indicate their orders were executed using Citi Match. In most of those cases, that is factually incorrect.
The SEC’s Joseph G. Sansone adds:
“Market participants deserve to make informed decisions about where they execute their orders. All trading venues, regardless of their trade volume, must ensure that their users have accurate information, particularly about key issues like order routing.”
CORE also failed to register as a national securities exchange connected to Citi Match, which only further warrants the SEC’s scrutiny. As such, Citigroup is forced to pay a fine of $6.5m on top of a disgorgement and prejudgment interest worth $5.4m. CORE will also pay a separate fee of $1m. Issues like these need to be highlighted and corrected accordingly.