Ho John Lee’s Weblog

As financial systems become more automated, there more opportunities for humans to key in an extra zero or transpose a digit or two, with instantaneous results. Last week there was yet another “fat finger” trade, this time in India on the Bombay Stock Exchange, during the first day of trading for Tulip IT Services. Someone offered to sell shares at 25 paise (less than one US penny), a fraction of the market price of 171 rupees (around US $3.80), and found many takers.

It looks like the buyers are going to have to pay the market rate after all, though.

The BSE today said some trades executed at 25 paise in the shares of Tulip IT Services on Thursday will not be settled at this rate.

The exchange said trades executed below Rs 96 would be transacted at Rs 171.15. This means that investors who bought shares at 25 paise will have to pay Rs 171.15 and sellers will get the money at such rate.

A followup article in the Hindu Business Line recaps some notable fat fingered trades, and notes:

However, the record in fat finger trading is still held by a trader of Mizuho Securities, the broking arm of the Mizuho Financial Group of Japan. The trader had managed to sell shares worth £1.6 billion in a local recruitment agency, J-Com, which had just been floated and had a market value of little more than £50 million. The December 8, 2005, “sell” order, was mistakenly placed for 600,000 shares, despite the fact that J-Com had only 14,000 shares in issue. The order had created chaos in the market and had resulted in a 301-point fall on Japan’s main stock market index, the Nikkei 225.

Along these lines, there are some entertaining (staged, I think) cameraphone photos of the Mizuho trading floor over at TripleWitchingFriday (via Paul Kedrosky). More on the Mizuho trade here.

Update: 02-17-2006 12:16 PDT - Various participants in the Mizuho trade are donating 20 billion yen (US $170 million) to a fund for improving Japan’s stock trading system.

This entry was posted on Saturday, January 14th, 2006 at 11:20 am and is filed under Business, Finance/Investing, Humor, Front Page. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.