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Wednesday February 09, 07:02
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Citigroup bond trades prompt call for more EU regulation
(by Mark Riley)
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Citigroup’s questionable bond trades have prompted calls for EU regulation in the market.
Citigroup’s strategy to increase the bank’s profits lies in destabilizing of the eurozone government bond futures market and “annihilating” smaller competitors. Such plan was highlighted in an internal Citigroup memorandum published in the Financial Times last week and led by Jean-Claude Trichet, the European Central Bank president, to call for a deep investigation.
On August 2, the eurozone bond market was staggered by Citigroup sale of about €12 billion worth of the bonds in order to buy back €4 billion at lower prices later. The selling orders infuriated eurozone governments.
BaFin of Germany and UK’s Financial Services Authority are performing investigations into the trades, and other European countries are conducting inquiries as well.
Citigroup’s manipulation of Eurex futures market, the benchmark for eurozone government bonds, was confirmed by the evidence offered by BaFin last month. The case was transferred to prosecutors in Frankfurt where one of them announced that preliminary inquiries on six trades will be completed by next month, possibly followed by charges.
Pervenche Beres, who chairs the European Parliament’s influential committee on economic and monetary affairs, said the case has raised concerns about the level of financial market regulation in the UK.
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