UPDATE
REGULATION FIXED INCOME
Citi fined $12
million for
misleading
investors about
HFTs in its dark
pool Good news for vendors as buy-side
fixed income desks eye new tech
platforms
Citigroup has been fined $12 mil-
lion after US regulators found it
was misleading investors about
high-frequency traders (HFTs)
operating in its dark pool.
The Securities and Exchange
Commission (SEC) said in a
statement that investors were
‘misled with assurances’ that
HFTs were not allowed to trade
in Citi Match, Citi’s premi-
um-priced dark pool, via Citi
Order Routing and Execution
(CORE).
In fact, the SEC found that two
of Citi Match’s most active users
qualified as HFTs and executed
more than $9 billion of orders in
the dark pool.
“Market participants deserve
to make informed decisions
about where they execute their
orders,” said Joseph Sansone,
chief of the SEC enforcement di-
vision’s market abuse unit. “All
trading venues, regardless of
their trade volume, must ensure
that their users have accurate
information, particularly about
key issues like order routing.”
Investors were misled about
the HFTs operating in Citi’s dark
pool for over two years, with
almost half of all Citi Match
orders being routed to and then
executed in other d ark pools
and exchanges, according to
the SEC.
A
lmost two-thirds of European
fixed income desks are con-
sidering partnerships with at least
three new platforms in the coming
year, according to new research.
The study from WBR found that
heads of desks stated the need for
new technologies in order “to meet
best execution requirements and
maintain a competitive edge”.
When asked what new number of
platforms and alternative technol-
ogy solutions they were consider-
ing in the next 12 months, almost
two-thirds said three or more, with
36% saying they would look at one
or two.
The results showed that 10% said
they would even consider over six
new technology solutions.
According to WBR, the aim of the
research was to show how MiFID
II has had an impact on trading
practices and the emerging tech-
nology requirements of European
buy-side desks.
“Buy-side desks are having to
become more pro-active in their
search for technology partners,”
said Carl James, global head of
fixed income trading, Pictet Asset
Management, in the report. “At one
level this is about an arms race for
liquidity and survival.”
When evaluating new platforms,
the heads of fixed income surveyed
ranked its ability to integrate with
a desk’s existing technology as
the most important factor, closely
followed by the credibility of the
provider behind the platform.
Post-MiFID II, 30% respond-
ed that click-to-trade protocols
present the most promising
opportunities for the buy-side, as
more participants move beyond
the established request for quote
(RFQ) system. This was closely
followed by 27% viewing stream-
ing executable prices as the most
promising trading protocol.
“While most bond trades current-
ly occur on RFQ, survey respon-
dents expressed a clear preference
for trading on firm prices,” said
Ian Shea, head of European fixed
income trading at Jane Street.
“Whether it’s click to trade,
streaming executable prices, or
order books, two-thirds of all
buy-side trader responses indicate
a preference for seeing actionable
prices before transacting.”
Issue 57 // TheTradeNews.com // 9