Cit­i­group sus­pended from Ja­panese bond auc­tions for manipulati­ng fu­tures prices

The Hindu Business Line - - BANKING - BLOOMBERG

Cit­i­group was sus­pended from the pri­mary group of deal­ers that par­tic­i­pate at cer­tain Ja­panese gov­ern­ment bond auc­tions after it was found to have ma­nip­u­lated fu­tures prices.

The Min­istry of Fi­nance or­dered Cit­i­group Global Mar­kets Japan Inc’s ex­clu­sion from par­tic­i­pat­ing in non­price com­pet­i­tive auc­tions and cer­tain other gov­ern­ment bond sales for a month from June 13, it said in a state­ment on Tues­day.

The sus­pen­sion comes days after the Fi­nan­cial Ser­vices Agency fined the firm ¥133 mil­lion ($1.2 mil­lion), and or­dered it to im­prove in­ter­nal con­trols for fail­ing to de­tect in­stances of ma­nip­u­la­tion of the Ja­panese gov­ern­ment bond mar­ket. Cit­i­group was found to have placed or­ders last Oc­to­ber for JGB fu­tures con­tracts with­out in­tend­ing to ex­e­cute them, a prac­tice known as spoof­ing.

The com­pany had de­fi­ciency in trade sur­veil­lance re­lated to mar­ket trans­ac­tions of de­riv­a­tives, the fi­nance min­istry said on Tues­day.

The or­ders, placed at the Osaka Ex­change by an em­ployee of London-based Cit­i­group Global Mar­kets, mis­led other in­vestors into be­liev­ing that the 10-year JGB fu­tures mar­ket was thriv­ing, the Se­cu­ri­ties and Ex­change Sur­veil­lance Com­mis­sion said in March.

Pri­mary deal­ers are given ac­cess to fi­nance min­istry of­fi­cials in re­turn for an obli­ga­tion to bid for and pur­chase a cer­tain amount of gov­ern­ment bonds at each auc­tion. There are cur­rently 21 of them, in­clud­ing Cit­i­group, ac­cord­ing to the min­istry’s web­site.

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