LONDON/NEW YORK: The head of the UK Financial Conduct Authority said his agency will look at how firms use algorithms in currency trading as a probe into the pound’s October flash crash intensifies, with regulators summoning Citigroup Inc. to discuss its possible role in the incident, according to people with knowledge of the situation.

The watchdog is conducting a general review of the use of algorithmically-driven trading programs, looking at whether firms have proper safety measures in place to control them, FCA Chief Executive Officer Andrew Bailey told Bloomberg in an interview Friday.

“They’re black boxes up to a point,” Bailey said. The FCA wants to determine whether “firms appointed risk managers to control the use of them? When does it make sense to use them, and when not to use them?”

Citigroup will meet with the UK Financial Conduct Authority and the Prudential Regulation Authority in coming days, two people with knowledge of the situation said Thursday. They didn’t want to be identified because the talks are private.

Just after midnight British time on October 7, when most foreign-exchange trading was taking place in Asia, the pound plunged 9 per cent against the dollar in less than 40 seconds, the most since the aftermath of the Brexit referendum in June. Traders at the time speculated the crash might have been sparked by human error, or a so-called “fat finger,” with algorithms adding to selling pressure at a time of day when pound liquidity is relatively low. The currency, which dropped to a 31-year low, quickly rebounded on the day.

The Bank of England has said it’s investigating the incident. People familiar with the probe have said it has involved questions around the actions of one Citigroup trader in Tokyo, whose use of an electronic trading tool could have worsened the flash crash. In its recent Financial Stability Report, the BOE said the drop “may have been exacerbated by the use of algorithms that were inappropriate for the trading conditions.”

Citigroup investigated the incident and cleared the trader of wrongdoing, and the trader is still employed by the bank, according to another person familiar with the matter.

Spokesmen for Citigroup, the PRA and the FCA declined to comment. The Financial Times reported Citigroup’s meeting with regulators on Thursday.

Authorities have written to a number of banks since the event telling them to make sure they have proper oversight and risk measures in place for their electronic trading systems, particularly during illiquid times of the day, the people said. The Bank for International Settlements is preparing a report on the flash crash with contributions from the BOE, and aims to release it in January.

— Bloomberg