Citigroup Clears The Decks With LSE

LONDON – Citigroup has tightened its internal processes, renegotiated its data licence with the London Stock Exchange, and paid the LSE £6.4 million for under-reporting its data usage, sources told sister publication Inside Market Data in early February.

The settlement, made late last year, covered the unauthorised usage of data from the LSE over a substantial period of time – possibly over the past decade, multiple sources say.

LSE officials decline to comment. "Citigroup highly values our relationship with the LSE and is committed to meeting our contractual obligations with them," says a bank spokesperson.

According to a source familiar with the situation, the LSE's auditing team went into the bank early last year and found "much broader usage than was being claimed and paid for".

No-one is suggesting that Citigroup intended to deliberately defraud the LSE. Instead, the error appears to be due to the growth of algorithmic trading and increased moves away from data terminal business models to open feeds. As a result, real-time data from the LSE and its index subsidiary FTSE was being used in algorithmic trading models, which were then proliferated throughout the organisation and re-used in other models. By all accounts, the bank did not realise that redistributing these models – which contained LSE data – to people not authorised to receive the data constituted a violation of its agreement.

"It just spreads internally like a virus, because no-one is monitoring that the licence is tied to a set number of users," the source says.

Following the discovery, Citigroup and the LSE entered into negotiations to resolve the issue to the satisfaction of both parties, and they finalised the settlement in the fourth quarter of last year, the source says. The bank has also agreed to tighten its controls, and has signed up to a new multi-year agreement with the exchange that includes a redistribution licence. It has also cut back on data usage beyond the number of users allowed by that agreement.