The technology snafu was one of several at Citigroup in recent years. Photograph: Jin Lee/BloombergThu Jun 9 2022 - 16:49
Derivatives executives said that malfunctions leading to missed margin calls were rare but not unheard-of. The incident highlighted the extent to which the financial system was under stress during the market sell-off at the onset of the pandemic. This year, erroneous trades were placed by a trader at the bank on European stocks, causing a mini-flash crash.
Although he did not name the institution in question, several people familiar with the matter have named the party as Citi, which operates one of the largest derivatives clearing brokers on Wall Street, with tens of billions of dollars in customer collateral. In traditional markets, clearing brokers collect margin from customers every day and use it to support their open positions. FTX’s plan would replace the intermediary with an algorithm. A shortfall in margin in a customer account would automatically trigger partial sell-offs of positions until they could be covered by the margin available.