Eurex Clears Citigroup in Case
Of the 'Dr. Evil' Bond Trades

By Adam Bradbery
Dow Jones Newswires
The Wall Street Journal
Monday, June 20, 2005

Citigroup Inc. said the sanctions committee of
Swiss-German futures market Eurex has cleared it of
violating the exchange's rules in a series of
controversial bond trades last summer.

The New York bank said the move concludes all
investigations in Germany into the Aug. 2 operation,
dubbed Dr. Evil by the bank's traders, under which the
bank bought German debt futures on Eurex before
selling €12.4 billion ($15.22 billion) of euro-zone
government bonds on a range of electronic trading
platforms. It then bought back €3.77 billion of bonds
about 30 minutes later to net about $17.5 million in
profit.

The supervisory authority of the German state of
Hesse, which oversees Eurex, said in early March it
had found signs Citigroup violated the "commercial
trust" of the exchange. The sanctions committee, an
independent panel of the exchange's management, had
the power to fine Citigroup and the traders involved
as much as €250,000 for each violation of Eurex rules
and could have excluded Citigroup from trading on
Eurex for as long as 30 days.

The committee fined Citigroup a nominal €5,000 for
failing to register a trader on a timely basis, the
bank said.

Eurex, its sanctions committee and the supervisory
authority of the state of Hesse declined to comment on
details of the investigation. One Eurex official said
German law prohibited anyone except Citigroup from
commenting on the matter. In a statement, the bank
said it wasn't in a position to release further
details of the decision.

Citigroup's Aug. 2 trades prompted a range of
regulatory investigations. In January, German
regulator BaFin said it believed there was evidence of
possible market manipulation by six Citigroup
employees, but the Frankfurt state prosecutor decided
there was no legal basis for a case.

Citigroup suspended five European government-bond
traders in early February. The co-head of European
government bond trading, Spiros Skordos, wasn't
suspended.

A Citigroup spokeswoman said the traders will remain
on a leave of absence "pending the conclusion of other
regulatory investigations."

Regulatory probes remain under way in the U.K. Italy,
France, Belgium, Spain, and Portugal.