Citi bond traders indicted over 'Dr Evil' trade

Citi bond traders indicted over 'Dr Evil' trade

Italian magistrates have indicted seven former Citigroup traders on charges of market manipulation in the sale and repurchase of government bonds on the MTS electronic fixed income network three years ago.

According to a Reuters report the traders, who are no longer employed by Citigroup, will stand trial on charges of market manipulation. The trial is scheduled to begin on 30 October.

The market was thrown into confusion on 2 August 2004 when Citigroup pushed through EUR11 billion in paper sales in two minutes over the automated MTS platform. As the value of futures contracts fell and traders moved to cover their positions, Citigroup re-entered the market and bought back about EUR4 billion of the paper at cheaper prices. The strategy was dubbed Dr Evil, after the Austin Powers character, in an internal e-mail circulated by the traders.

Immediately afterwards MTS moved to impose temporary limits on the value and volume any one dealer can push through the system at a time. MTS also suspended Citigroup from trading on its bond network for one month after finding that the UK bank breached certain market regulations.

The UK's Financial Services Authority later fined Citigroup £13.9 million following its investigation into the controversial trading.

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