The Most Expensive Mistake in The Stock Exchange History

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1977
tokyo stock exchange

On Thursday 8th of December 2005 was a red letter day for the Tokyo Stock Exchange and Mizuho Securities. This happened when a trader at Mizuho Securities tried to sell 610,000 shares at 1 yen (less than a penny, actually about 0.8 cents) apiece of a job recruiting firm called J-Com Co. , which was having its public debut on the exchange. This concluded the single most expensive mistake in the stock exchange history, not just in Tokyo alone.

It had actually intended to sell 1 share at 610,000 yen (as at 2005, $5,041). Worse still, the number of shares in Mizuho’s order was 41 times the number of J-Com’s outstanding shares, but the Tokyo Stock Exchange processed the order anyway.

Another trader according to Mizuho, tried to cancel the order three times but the Tokyo Stock Exchange had a policy not cancel transactions even if they were executed on erroneous orders.

When the trade was concluded, Mizuho Securities had lost at least 27 billion yen ($225 million), which could rise, since it was sparked by human error. The loss almost matched Mizuho Financial Group’s ( Mizuho Securities) net profit of 28.1bn yen for the financial year to March 2005.

The error also affected the Shares of Mizuho Financial Group which fell 3.4%, the biggest fall of the day among Japan’s top three banking groups.

J-Com’s shares debuted at 672,000 yen ($5,600) on the Tokyo exchange’s Mothers market and plummeted  to 572,000 yen ($4,767). But a big buy bid placed after Mizuho Securities’ sell order helped lift J-Com to 772,000 yen ($6,433) at the close.

This incident was attributed to the Fat finger syndrome – the occasional tendency of stressed traders working in fast-moving electronic financial markets to press the wrong button on their keyboard and, in the process, lose their employer a mint.

The syndrome was not new to the Tokyo Stock Exchange as four years prior to the Mizuho trade error, UBS, the Swiss bank, mistakenly placed a sell order for 610,000 newly listed shares in the Japanese advertising giant Dentsu for 16 yen (12.8 cents) apiece. The prevailing market price was 420,000 yen ($3470). UBS, however, managed to cancel most of the transactions.

Sources: 

Typing Error Causes $225M Loss at Tokyo Stock Exchange – Fox News

Too fat, too fast. The £1.6bn finger – The Guardian

Probe into Japan share sale error

Huge ‘Fat Finger’ Error Worth $617bn Hits Japan Market

Also note that the foreign exchange of the said currencies were rates as of the time of the incidence. 

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