Britain Probes Citigroup Trades

Regulators are looking at a $13.6-billion sale of bonds followed quickly by a partial repurchase.

British regulators Wednesday began investigating unusual trading activity by Citigroup Inc. in European government bond and bond derivative markets.

The investigation may lead to formal disciplinary proceedings, the Financial Services Authority said.

On Aug. 2, Citigroup sold 11 billion euros ($13.6 billion) of euro-zone government bonds in less than two minutes and then bought back 4 billion euros of the securities at cheaper prices about a half-hour later, according to people familiar with the matter.

Citigroup declined to comment on the trades at the time, but the company issued a statement saying that “Citigroup continues to be a major provider of liquidity” on electronic-trading platforms for European government debt.

Such large trades have never happened before on MTS’ electronic bond-trading system, although Citigroup didn’t break any exchange rules.

Milan-based MTS has since enacted a rule limiting the size of trades.

Market participants face a two-month suspension from trading if they execute trades that exceed the new limits.

Citigroup said it would cooperate fully with the FSA investigation. “Beyond that, it is not appropriate for us to comment,” the company said.

Francesco Margini, deputy chief executive of MTS’ London subsidiary, EuroMTS, said it would “continue to cooperate” with regulators.