Fat Finger Syndrome Strikes Japanese Trading Firm

How'd you like to explain this mistake to your boss:

CLUMSY typing cost a Japanese bank at least £128 million and staff their Christmas bonuses yesterday, after a trader mistakenly sold 600,000 more shares than he should have.

The trader at Mizuho Securities, who has not been named, fell foul of what is known in financial circles as “fat finger syndrome” where a dealer types incorrect details into his computer. He wanted to sell one share in a new telecoms company called J Com, for 600,000 yen (about £3,000).

Unfortunately, the order went through as a sale of 600,000 shares at 1 yen each.

That error alone would have been bad enough, but the consequences were much worse because 600,000 shares represents more than 40 times the total number issued by the company, and the vast discrepancy effectively created a technical shortage of shares, worth about £1.6 billion.

The slip caused immediate shockwaves in the Tokyo market as traders tried to guess which firm had made the mistake. Fearing the impact, traders sold shares in all Japanese broking houses and the sell-off led to the value of the Nikkei 225 falling 2 per cent. It was only later that Mizuho admitted that one of its traders had made the error.

The order slipped through at about 9.30am and, one CLSA broker explained, “until the culprit firm was named around tea time, investors spent the day dumping the shares of every listed brokerage in Japan, in case it had been them”.

If Mizuho has to accept the loss, it may have to sell many of its stockholdings to raise the money, creating further pressure on Japanese stocks.

You have to wonder what kind of failsafe systems they'll have to create to avoid this kind of mistake in the future. They obviously didn't have anything in place, and can you imagine the damage an employee could cause if they wanted to hurt the company? Every investor would be at risk.