The Citibank owner still faces regulatory inquiries

The Frankfurt prosecutors office said there was insufficient evidence of criminal wrongdoing.

Investigations by market regulators into the 12.4bn-euro ($16.3bn; �8.6bn) deals last August are ongoing and the company may still face penalties.

US-based Citigroup said it regretted the trade "did not meet our standards".

The world's largest financial institution added: "We are committed to co-operating fully with all authorities to resolve this matter."

New law

The inquiry focused on the sale of European government bonds across 11 different markets.

Citigroup traders allegedly bought back some of the bonds at reduced prices almost immediately, netting a 13.4m euros profit.

The Frankfurt prosecutors office said there was no evidence the traders had tried to deceive the markets last August.

But it added that under a new law passed in October, similar actions might now be considered to be illegal.

The German investigation now rests with a disciplinary committee of the Eurex derivatives exchange. This committee could fine the bank or its traders up to 250,000 euros or impose a trading ban.

Citigroup operations elsewhere in the world have faced criticism from regulators recently.

Citigroup has been forced to close its Japanese private bank after repeatedly breaking local rules and it expects to pay almost $5bn to cover legal actions resulting from its relationship with the bankrupt telecoms firm Worldcom.