Friday, December 09, 2005

Pay attention to this little story

This is the kind of thing that can touch off major stock exchange collapses.

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.

It's worse than that.

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.
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. (Emphasis by the Oklahomilist)

When energy and precious metal prices are rising and overall world debt, especially in the U.S. is increasing at a head-spinning rate, this is not the time to be getting careless with the buy-sell orders. Like the bullet that felled Archduke Ferdinand, something like this could be the tipping point for a lot of unhappiness in the world.

If you want confirmation that actions have consequences, just ask any secretary or file clerk at Mizuho. The annual Christmas party for Wednesday night was immediately cancelled. That was insult. The injury came when the promised Christmas bonuses were cancelled too.

Come one guys! Even the Titanic had a dance band!


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