Jan 24, 2019
A Brief History of Some of the Market’s Worst Fat Fingers
(Bloomberg) -- An 83 percent plunge in storied Singapore-listed stock Jardine Matheson Holdings Ltd. Thursday has traders pointing to the most likely culprit: a fat finger.
Shares of the 186-year-old conglomerate plummeted in pre-market trading before bouncing right back to eventually trade higher as the session progressed. A spokesperson for the firm said it was aware an electronic trading error had occurred, while Singapore Exchange Ltd. said the bourse is looking into the stock slide.
The episode is just the latest reminder for investors that even as global financial systems become ever faster and more complex, things can still go rapidly awry thanks in part to simple human error. Here’s a look at a few recent examples that show nobody is perfect -- not even the almighty computer algorithm:
Deutsche Bank’s $35 Billion Flub
German lender Deutsche Bank AG accidentally transferred 28 billion euros ($35 billion) to one of its outside accounts, Bloomberg News first reported in April 2018.
The errant transfer occurred as part of the bank’s daily derivatives dealings, according to a person familiar with the matter. The sum far exceeded the amount it was due to post and landed in an account at Deutsche Boerse AG’s Eurex clearinghouse, temporarily boosting the collateral held by the world’s fourth-largest clearinghouse by more than half.
The embarrassing blunder couldn’t have come at a worse time as Deutsche Bank was struggling at the time with a leadership tussle that resulted in the exit of CEO John Cryan and two of his top lieutenants, and tainted its chairman.
Korea’s $105 Billion Ghost Stock
Someone at Samsung Securities Co., one of South Korea’s largest brokerages, tried to pay employees 1,000 won (93 U.S. cents) per share in dividends under a company compensation plan, but instead gave them 1,000 company shares instead, worth on paper about 112.6 trillion won, more than 30 times the company’s market value.
Things got worse when 16 employees sold the stock, spurring a rout of as much as 12 percent in the space of minutes on April 6, the biggest decline since the global financial crisis.
Gold’s No Haven
Gold traders were rattled in June 2017 by a huge spike in volume in New York futures when trading jumped to 1.8 million ounces of gold in just a minute, an amount bigger than the gold reserves of Finland. Gold futures fell as much as 1.6 percent on Comex. One possible explanation: a mistaken trade of 18,149 lots of a futures contract, about 100 times the size of a typical trade of 18,149 ounces.
“No one has a clue, apart from the unfortunate individual that pressed the wrong button,” David Govett, head of precious metals trading at Marex Spectron Group in London, said at the time of the spike in volume.
Disney’s Phantom Menace
Volume in Walt Disney Co. appeared to surge for a moment in February 2015 when more than 131 million shares of the stock seemed to trade at once on the New York Stock Exchange, a transaction so big only one shareholder probably could have placed it. But it turns out it never happened, as the initial trade of 131.66 million shares was cut 100-fold to a much less magical 1.3166 million. The size of the order was incorrectly reported at first, according to a person familiar with the matter.
It’s not like Disney needed the volume boost, with shares jumping nearly 8 percent on the day to their highest since at least 1974 after posting quarterly sales and earnings that topped estimates thanks to “Frozen” gifts over the holidays.
Mizuho’s $345 Million Typo
Mizuho Securities Co. in December 2005 mistakenly offered to sell 610,000 shares of employment agency J-Com Co. for 1 yen each, instead of one share for 610,000 yen, something the firm blamed on a typing error. Problems with the Tokyo Stock Exchange’s computer system prevented the brokerage from canceling the sell order. Japan’s Financial Services Agency subsequently ordered Mizuho to improve its compliance and systems to prevent a repeat of the mistake. The regulator said Mizuho also failed to train traders sufficiently and didn’t assign senior staff qualified in such business to oversee operations.
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