Citigroup Suspended From Japan Bond Auctions After Manipulation

(Bloomberg) - After discovering the manipulation of futures prices, Citigroup Inc. has suspended participation in major dealer groups that are auctioned for certain Japanese government bonds.

The Treasury Department said in a statement on Tuesday that Japanese companies in Citigroup's global market are not allowed to participate in the June 13 "non-price competitive auction" and other government bond sales.

In the past few days, the financial services agency imposed a fine of 133 million yen ($1.2 million) on the company and ordered it to improve its internal control because it failed to find a way to manipulate the Japanese government bond market. Citigroup had ordered JGB futures contracts on the Osaka Exchange in October last year, and did not intend to execute them. This practice is called fraud.

“The company has flaws in trade regulation related to derivatives market transactions,” the Treasury said on Tuesday.

A Tokyo-based Citigroup spokesperson failed to comment immediately. The company said last week that it would take “quick action” to meet regulators' business improvement order.

A joint venture between Mitsubishi UFJ Financial Group and Morgan Stanley was suspended by the Tier 1 bond dealers group for a month of similar violations last year.