[sportstrader]

The Times December 09, 2005

Fat fingered typing costs a trader’s bosses £128m
From Leo Lewis in Tokyo



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.

Despite Mizuho’s attempts to rectify the mistake, some estimates put the possible financial damage to the firm at about 60 billion yen — a figure that may be big enough to destabilise the securities arm of what is one of the four largest financial groups in the world.

Makoto Fukuda, the company’s president, said that it expected a loss of 27 billion yen, which could rise above 30 billion but would not endanger its financial health.

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.

The incident centred on the flotation on the Tokyo stock exchange Mothers Index of J Com, a small telecoms outsourcing and recruitment firm that was expected to be valued at £60 million. Investors who applied for shares in the float were each allocated 15 shares worth 610,000 yen each and within minutes of the market opening, one of Mizuho’s clients wanted to sell a single share at 600,000 yen.

Unfortunately, the order went through incorrectly and most of the trade was executed.

It is thought that Mizuho, once it realised its mistake, sought to buy back 550,000 shares from itself in a desperate effort to limit the damage, which is expected to run into billions of yen because J-Com’s share price soared, making the repurchase more costly.

A trader at a rival firm said: “Someone in that office had to pick up the phone to his boss and authorise the use of billions of company dollars to correct a stupendous cock-up. Not a call you want to be making a couple of weeks before Christmas bonuses.”

Mizuho said it was discussing with the Tokyo stock exchange how to deal with the matter. There is a chance that Mizuho will persuade the Tokyo exchange, which is under pressure for allowing the obviously mistaken trade to go ahead, to have it cancelled.

As if the hapless trader was not unpopular enough, the firm also cancelled its end-of-year party, scheduled for last night.