[News Terms] Citigroup Fined 128.2 Billion KRW for 'Fat Finger' Error

Stock Price Plummets Due to Mistaken Entry of 1 Billion Instead of 1 Million Units
Attempted to Sell 1 Share at 610,000 Yen but Listed 610,000 Shares at 1 Yen
Broker Entered 1,000 Shares Instead of 1,000 Yen in Cash, Causing a Purchase Error

Global financial firm Citigroup was fined approximately 128.2 billion KRW for causing market turmoil due to a 'fat finger' error, where an employee mistakenly entered a large sell order while selling stocks.

'Fat Finger' literally means 'thick finger' or 'fat finger.' It refers to errors caused by human mistakes in device operation. In particular, it is a term used in financial markets to describe incorrect orders caused by mistakes in number input or clicking. The term originated as a joke that the finger was so fat that two keys were pressed simultaneously, resulting in incorrect input.

Citigroup logo.
Photo by Asia Economy DB

A representative case of a fat finger error occurred in May 2010 when an employee at a U.S. investment bank mistakenly entered a trade of 1 billion units instead of 1 million units, causing the Dow Jones average to drop 9.2% within 15 minutes. In Japan, in 2005, a Mizuho Securities employee tried to sell one share of stock priced at 610,000 yen but mistakenly offered 610,000 shares at 1 yen (about 10 KRW) each. The Tokyo Stock Exchange plunged sharply, and Mizuho Securities suffered a loss of about 40 billion yen (approximately 400 billion KRW at the time).

In South Korea, the Hanmaek Investment & Securities incident in 2013 is considered a representative fat finger case. At that time, a Hanmaek Investment & Securities employee mistakenly entered the expiration date of an option pricing program as 0 days instead of 365 days, resulting in a loss of 46 billion KRW and eventual bankruptcy.

On April 6, 2018, Samsung Securities mistakenly entered 1,000 shares instead of 1,000 KRW in cash dividends for 2,018 employee stock ownership association members. As a result, instead of the intended 2.81 billion KRW, 2.81 billion shares were credited to the employee stockholders. This amounted to a huge cash value of 112 trillion KRW.

The problem escalated when about 16 Samsung Securities employees sold 5.01 million of the mistakenly credited shares on the market that morning, spreading the incident. It is estimated that Samsung Securities incurred losses exceeding 10 billion KRW from this event.

According to Reuters and other sources on the 24th, German financial authorities imposed a fine of 13 million euros (13.94 million USD) on Citigroup on the 20th for inadequate management of its sell order trading system. Citigroup's sell order error occurred on May 2, 2022. While selling company-held stocks worth 58 million USD, a Citigroup employee mistakenly entered a sell order for 440 billion USD (approximately 612 trillion KRW).

However, Citigroup failed to recognize the erroneous order and sent the sell signal to the market, resulting in 1.4 billion USD worth of orders being executed.

The German government pointed out that "Citigroup failed to prevent the transmission of the incorrect order." Earlier, the UK financial authorities had fined Citigroup 78.24 million USD related to this incident. Due to this event, Citigroup will pay a total fine of 92.18 million USD (approximately 128.2 billion KRW) to the UK and German authorities.

Citigroup stated, "We have taken measures to strengthen systems and controls and continue to strive to ensure full regulatory compliance."