US banking giant Citigroup has said one of its traders made a mistake in what it called a “flash crash” in stock markets in Europe on Monday.
A flash crash is an extremely rapid fall in the price of one or more assets, often caused by a trading error.
Trading was briefly halted in several markets after major stock indexes fell just before 8:00 GMT on Monday.
Nordic stocks were hit hardest, while other European indices also fell briefly.
“This morning one of our merchants made a mistake entering a transaction. Within minutes we identified and corrected the error,” the New York-based bank said in a statement late Monday.
The flash crash sent European stocks suddenly plummeting on a day when trading was particularly thin due to holidays around the world.
The Swedish benchmark stock index Stockholm OMX 30 was one of the hardest hit, falling 8% at times before reversing most of those losses to end the day down 1.87%.
Flash crashes can be caused by human error or so-called “fat finger” trades – an indication that someone has entered a trade’s details incorrectly.
Such trading errors and the flash crashes they can cause are often costly. They have shaken exchange rules and even resulted in criminal convictions.
In August 2012, a computer glitch at US financial services firm Knight Capital caused a major stock market disruption that cost the company around $440 million.
A sudden crash on the Singapore Stock Exchange in October 2013 caused some shares to lose up to 87% of their value and new regulations were introduced to avoid a repeat of the incident.
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In 2020, UK-based former stock trader Navinder Sarao was sentenced to a year of house arrest for inciting a brief $1 trillion US stock market crash 10 years earlier.
Using specially programmed high-speed software, Sarao placed thousands of unfulfilled orders, creating the illusion of market demand. If he canceled or changed his bids, he could benefit.
The activity — known as “spoofing” — contributed to the market instability that led to the “Flash Crash” in May 2010, when the Dow Jones index fell nearly 1,000 points in a matter of minutes.
The US made spoofing a crime in 2010 as part of a broader effort to tighten regulations after the 2008 financial crisis.
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