A 3.25 Billion-Dollar “Typo” (Luckly, not mine!)

A Japanese brokerage company mis-entered a stock sell order on their computerized trading system. They transposed the number of shares they wanted to sell with the price-per-share at which they wanted to sell, offering to sell 610,000 shares of such-and-such a stock for 1 yen each, rather than the intended offer to sell one share for 610,000 yen. In dollars and cents, that's an offer to sell over half a million shares of a stock worth over $5,000 for less than a cent each.

Ouch.

Doing the math (¥610,0002) one calculates that it could have been “ouch” to the tune of about 3.25 billion dollars, but the trade was apparently canceled after a loss of “only” $351 million.

I thought “ouch” when I first saw this in December when it happened. It's in the news again because the Tokyo Stock Exchange rejected the brokeage house's claim for damages. It seems that the brokerage house noticed the error and tried to cancel the order at a point when the loss was only about $3 million, but the exchange computer system wasn't working or something, and it went on to the $350 million loss.

I don't think this could happen in The States, as I'm sure such an order would be rejected out of hand by any exchange. Besides the price being so far away from the bid/ask, the number of shares was 41× the entire shares outstanding for the company, an impossible number to sell. (Why the brokerage house's computer system allowed the trade to be entered in the first place is another question.)

Anyway, as someone who has the experience of being a bit sloppy on my order-entry form and ended up doing a “buy” when I intended a “sell,” I feel their pain.


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