Curriculum·R404 Execution and Trade Craft·about 34 min
Order types on derivative venues
By the end of this lesson you can
- →Classify the order types and flags by what each one bounds: price, time, or position
- →Explain why reduce-only is the single most valuable flag on a derivative venue
- →Compute the cost of an unintended position and the saving from maker pricing
- →Distinguish a hard block from a warning, and configure the ones you control
Senior · enrolled learners
This lesson opens with The Citigroup basket order, 2 May 2022.
- What happened
- On 2 May 2022 a trader at Citigroup Global Markets Limited, Citi's London-headquartered broker-dealer, intended to sell a basket of equities worth $58M and, by entering the value in the unit quantity field, created a basket with a notional size of $444B. A pop-up presented 711 warning messages in one list, of which 18 were visible without scrolling; the trader overrode all the soft warnings. Two hard blocks, which could not be overridden, stopped $248B, and the firm's algorithmic system blocked seven more orders, so that in all the firm's own controls prevented $255B progressing. The remaining $189B went to a VWAP algorithm that sliced it for sale over the rest of the day, and further controls suspended 242 orders worth $163B while it ran. About $1.4B executed across European exchanges before the trader canceled the rest at 09:10, coinciding with a material short-term drop in several European indices. In May 2024 UK regulators fined the firm £61.6M, about $78.4M, being £27.8M from the Financial Conduct Authority and £33.9M from the Prudential Regulation Authority. The PRA stated that deficiencies in the firm's trading controls contributed to the incident, in particular the absence of certain preventative hard blocks and the inappropriate calibration of other controls; the FCA found that the main missing control was a basket-level notional hard block, which the firm's New York desk had had since 2013.
- The decision point
- The error was a factor of about 7,655 on the intended size. The 711 warnings were seen by a person and overridden in one action; the two hard blocks could not be overridden and stopped $248B. What reached the market came through the gap where the missing basket-level hard block should have been, and was limited by controls that suspended orders in flight, by an algorithm that spread the rest over the day, and by a trader who canceled. The regulators' findings name the shape precisely: hard blocks prevent, and warnings only inform the person who is already making the mistake.
- Recorded loss
- $78,400,000
What you will be able to answer
- →What does each order type bound?
- →Why is reduce-only the most valuable flag?
- →What does an extra digit cost?
- →What does post-only save?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.bankofengland.co.uk/news/2024/may/pra-fines-citygroup-global-markets-limited
- https://www.fca.org.uk/publication/final-notices/citigroup-global-markets-limited-2024.pdf
- https://www.bankingdive.com/news/citi-flash-crash-78-million-penalty-british-fca-pra-manual-error-2022/716810/
- https://www.sec.gov/files/marketevents-report.pdf
Confidence high·Volatility medium·Reviewed 2026-08-07·Owner unassigned
Contested
The basket figures are the FCA Final Notice's: $58M intended, $444B created, $248B stopped by two hard blocks, seven more orders blocked so that $255B in all was prevented, $196B routed and $189B released to the VWAP algorithm, $163B suspended in flight, $1.4B executed, canceled at 09:10. The fine is £61.6M (£27,766,200 FCA, £33,880,000 PRA after a 30 percent settlement discount); Banking Dive converts it as $78.4M. The FCA also records a $48M trading loss to the firm.
An earlier version of this lesson said the error was caught by one control, then by time, then by a human, and called only the first a control. The FCA's notice shows that in-flight controls also suspended $163B of what was released, and that the trader saw and overrode 711 warnings. The lesson now says so, and its argument, that hard blocks work and warnings rely on the person making the error, is stronger for it. The controls that blocked the basket were Citi's own order-management and algorithmic controls, not a venue's order-size limit; the venue setting recommended below is the retail analogue, not what happened at Citi.
Part four refers to the course opener, the 6 May 2010 flash crash. Per the joint SEC and CFTC report, the 75,000 contracts were not unprecedented: two single-day sell programs of equal or larger size had been executed in the E-Mini in the prior twelve months, one by the same trader, which on that occasion took more than five hours using algorithms that took account of price, time and volume. The report also calls it the largest net change in daily position of any E-Mini trader that year. An earlier version said the trade was about 1.3 percent of the day's volume; no source read gives that figure, and it is removed.
Order type names, flag availability and fee schedules vary by venue and change frequently. Reduce-only, post-only and the time-in-force options described here are common rather than universal. Read the venue's order documentation rather than assuming this set.
R403-06 owns the distinction between an alert and a circuit breaker at the level of risk policy. This lesson applies it to individual orders. R411-05 applies it inside an automated system. Keep both splits.