Citi’s decision to sack eight Hong Kong traders, for being a principal in trades while saying it was only an agent, should be seen in the context of greater strength among Asia-Pacific regulators.
Citi’s action followed an internal review rather than any Securities and Futures Commission penalty, but the regulator did indirectly have a hand in its detection.
Specifically, equity traders had used Citi’s own balance sheet on the other side of client trades. Those clients understood the bank was only acting as an agent – matching orders between clients – when in fact Citi’s position made it a principal.
Citi found the behaviour in an internal review of cash equities execution in Hong Kong and acted quickly: eight traders were fired, three more suspended, and then other staff moved on to the desk to keep business moving.
Citi’s swift action, and its review in the first place, reflect a marketplace in which banks are far more wary of the SFC than they used to be. UBS’s loss of the right to sponsor Hong Kong listings is the most obvious example, but the regulator has also reprimanded (and modestly fined) Standard Chartered, Morgan Stanley and Bank of America Merrill Lynch, as well as Citi itself last year.