Europe’s stock market crash triggered by Citi trader wrong

Citigroup said they had identified the cause of the flash crash and corrected the error “within minutes”.

Jim Dyson | Getty Images News | Getty pictures

A so-called “flash crash” in European markets on Monday caused several indices to fall sharply, and triggered alarm among investors on a day when trading was thin due to public holidays around the world.

Trading was temporarily halted in several markets just before 08.00 London time on Monday after some European shares suddenly fell.

Nordic equities were hit the hardest, with the Swedish Stockholm OMX 30 stock index falling as much as 8% at one point, before pairing most of these losses to end the session down 1[ads1].9%.

Other European markets also fell for a short period.

The American banking giant Citigroup took responsibility for the lightning crash on Monday.

“On Monday, one of our traders made a mistake while entering a transaction. Within minutes, we identified the mistake and corrected it,” a Citi spokesman told CNBC.

European markets closed Monday’s session sharply lower as investors reacted to the lightning crash and digested weak economic data from China and Germany.

The pan-European Stoxx 600 traded marginally lower on Tuesday afternoon as market participants monitored policy rate decisions around the world.

What is a flash crash?

A flash crash refers to an extremely sharp drop in the price of an asset followed by a rapid recovery within the same day.

They usually take place over a few minutes and are often caused by a trading error or a so-called “fat finger” error – when someone presses the wrong data key to enter data.

High-frequency trading companies have been blamed for a number of flash crashes in recent years.

In January 2020, high-frequency futures trader Navinder Singh Sarao was sentenced to one year in prison for helping to trigger a short-term stock market crash of $ 1 trillion ten years earlier.

Sarao was charged by the US Department of Justice, accused of fraud, commodity fraud and manipulation, as well as a count of “spoofing” – when a trader submits thousands of bids with the intention of immediately canceling or changing them before execution.

The fabrication of sudden market activity created a momentum in the price that Sarao was able to profit from.

The United States turned the practice of “spoofing” into a crime in 2010 in an attempt to tighten regulations following the 2008 financial crisis.

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