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Citi (C) Agrees With $13M Settlement for Dark Pool Probe
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Legal hassles have heightened for Citigroup (C - Free Report) , as the bank has been slapped with a fine of $13 million by the federal regulators. The company has been accused of malpractices related to its dark pool — CitiMatch — amid ongoing scrutiny around the U.S. share trading industry.
Per the U.S. Securities and Exchange Commission (SEC), Citigroup has been penalized with $6.5 million, and will pay $5.4 million as disgorgement and prejudgment interest. Further, the bank’s affiliate — Citi Order Routing and Execution (CORE) — has been fined with an amount of $1 million.
Allegations
Dark pools are private platforms wherein the secrecy of investors is guarded well in comparison to public exchanges. The crux of dark-pool trading is that there is less transparency in trading, minimizing the market impact. Further, price and volumes of trade are predetermined and are revealed only after the trade.
It is alleged that Citigroup Global Markets Inc, a unit of Citigroup, defaulted in maintaining the policies and procedures to guarantee that clients trading in the CitiMatch dark pool were provided the best possible prices. The bank has been accused of misleading clients as presence of high-speed traders on the private trading platform was concealed from them. Notably, more than $9 billion of orders was executed by two such active traders.
Moreover, the SEC has accused the bank for routing and executing about half of its dark-pool orders through other trading venues irrespective of having different premium features as Citigroup’s. Notably, such moves were not disclosed by the bank for more than two years.
“Market participants deserve to make informed decisions about where they execute their orders,” said Joseph G. Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit.
“We are pleased to have the matter resolved,” Danielle Romero-Apsilos, a Citi spokeswoman noted.
Similar Cases
Among other holders of the dark pool, Barclays PLC (BCS - Free Report) , Goldman (GS - Free Report) and Credit Suisse Group AG have been penalized since 2014 for their respective trading systems.
Bottom Line
Heightened investigations and lawsuits surrounding dark-pool trading and high-speed trading reflect efforts of the regulators and the government to bring transparency and stability in the trading industry and thereby, safeguard investors’ interests.
Though Citigroup has undertaken special measures to combat the rise in expenses, persistent litigation issues will be a headwind for the company in the forthcoming quarters.
Shares of Citigroup have lost around 3% over the past six months compared with the 3.8% decline recorded by the industry. Citigroup currently carries a Zacks Rank #3 (Hold).
Zacks Research has released a report that may shock many investors. One stock stands out as the best way to invest in the surge to electric cars. And it's not the one you may think!
Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
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Citi (C) Agrees With $13M Settlement for Dark Pool Probe
Legal hassles have heightened for Citigroup (C - Free Report) , as the bank has been slapped with a fine of $13 million by the federal regulators. The company has been accused of malpractices related to its dark pool — CitiMatch — amid ongoing scrutiny around the U.S. share trading industry.
Per the U.S. Securities and Exchange Commission (SEC), Citigroup has been penalized with $6.5 million, and will pay $5.4 million as disgorgement and prejudgment interest. Further, the bank’s affiliate — Citi Order Routing and Execution (CORE) — has been fined with an amount of $1 million.
Allegations
Dark pools are private platforms wherein the secrecy of investors is guarded well in comparison to public exchanges. The crux of dark-pool trading is that there is less transparency in trading, minimizing the market impact. Further, price and volumes of trade are predetermined and are revealed only after the trade.
It is alleged that Citigroup Global Markets Inc, a unit of Citigroup, defaulted in maintaining the policies and procedures to guarantee that clients trading in the CitiMatch dark pool were provided the best possible prices. The bank has been accused of misleading clients as presence of high-speed traders on the private trading platform was concealed from them. Notably, more than $9 billion of orders was executed by two such active traders.
Moreover, the SEC has accused the bank for routing and executing about half of its dark-pool orders through other trading venues irrespective of having different premium features as Citigroup’s. Notably, such moves were not disclosed by the bank for more than two years.
“Market participants deserve to make informed decisions about where they execute their orders,” said Joseph G. Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit.
“We are pleased to have the matter resolved,” Danielle Romero-Apsilos, a Citi spokeswoman noted.
Similar Cases
Among other holders of the dark pool, Barclays PLC (BCS - Free Report) , Goldman (GS - Free Report) and Credit Suisse Group AG have been penalized since 2014 for their respective trading systems.
Bottom Line
Heightened investigations and lawsuits surrounding dark-pool trading and high-speed trading reflect efforts of the regulators and the government to bring transparency and stability in the trading industry and thereby, safeguard investors’ interests.
Though Citigroup has undertaken special measures to combat the rise in expenses, persistent litigation issues will be a headwind for the company in the forthcoming quarters.
Shares of Citigroup have lost around 3% over the past six months compared with the 3.8% decline recorded by the industry. Citigroup currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Best Electric Car Stock? You'll Never Guess It.
Zacks Research has released a report that may shock many investors. One stock stands out as the best way to invest in the surge to electric cars. And it's not the one you may think!
Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
See Zacks Best EV Stock Free >>