Typing Error Causes $3.5 Billion Trade for Company valued at $93 Million

Discussion in 'Wall St. News' started by fxpeculator, Dec 8, 2005.

  1. Mizuho Says Typing Error Sparked $3.5 Billion in J-Com Trades
    Dec. 9 (Bloomberg) -- Mizuho Securities Co., the brokerage arm of Japan's second-biggest bank, said a typing error by its trader sparked $3.5 billion of share trades in J-Com Co., a company valued at $93 million.

    ``We deeply apologize to investors, the issuer and other people for having caused such a huge problem,'' Makoto Fukuda, 59, Mizuho Financial Group Inc.'s trading unit president, said at a press conference in Tokyo late yesterday, bowing deeply.

    More than 700,000 shares in J-Com changed hands in its stock market debut yesterday, making the stock the most active by value on the exchange. The Osaka-based telecommunications company sold 2,800 shares in its initial public offering earlier this month, representing a fifth of the outstanding stock.

    Fukuda said the error has cost Mizuho 27 billion yen ($224 million) in unrealized losses, and that the amount may rise further. At 9:27 a.m. yesterday, Mizuho's brokerage wrongly put an order to sell 610,000 shares for 1 yen each, he said. It had intended to sell 1 share for 610,000 yen for a client. It realized its mistake at 9:29 a.m. Four attempts to cancel the order, including one by Mizuho's head office, failed. Mizuho then decided to buy back the shares, Fukuda said.

    ``The Tokyo market's reputation is tarnished and it has lost the trust of investors because it hasn't learned from previous errors,'' Hisakazu Amano, who helps oversee about $630 million at T&D Asset Management in Tokyo, said yesterday.

    Mizuho's error echoes a similar mistake on Nov. 30, 2001, when UBS AG sold 610,000 shares in Dentsu Inc. for 16 yen apiece on the company's debut. UBS had helped sell the shares at 420,000 yen in the IPO. Last month, the Tokyo Stock Exchange was unable to begin equity trading for the first time in its history after its computer system failed.

    Share Plunge

    Shares of J-Com fell by the 15 percent limit to 572,000 yen at 9:30 a.m. yesterday after a trader offered to sell about 600,000 shares at that price or less, Bloomberg data shows.

    By 9:38 a.m., 607,957 shares had been traded, including an order for about 467,000 shares, Bloomberg data shows. That trade alone was valued at $2.2 billion.

    J-Com stock closed at 772,000 yen, up by the maximum permitted 15 percent. The IPO price was 610,000 yen a share.

    Mizuho Financial's shares fell 31,000 yen, or 3.4 percent, to 890,000 yen in Tokyo. Mizuho shares were down 342.50 euros, or 5.28 percent, to 6,150 euros, at 5:13 p.m. in Frankfurt.

    There were 246 billion yen of Mizuho traded yesterday, making the stock the second most active by value after J-Com, where transactions amounted to 421 billion yen. Mizuho has a market value of $88.7 billion.

    ``This will make Japan the laughing stock of the world,'' said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co. in Tokyo. ``Mizuho and the Tokyo Stock Exchange have shown how weak their compliance and trading systems are.''

    A Tokyo Stock Exchange spokesman, Toru Onoda, declined to comment on Mizuho's role, citing a confidentiality agreement.

    ``We are investigating (the) trades of our shares together with Nikko Citigroup,'' Takashi Tanima, a spokesman for J-Com, said yesterday. ``We can't comment further.''

    To contact the reporters on this story:
    Takahiko Hyuga in Tokyo at thyuga@bloomberg.net.
    Last Updated: December 8, 2005 11:20 EST
  2. When the trader was asked about the mistake he was quoted as saying "Ooops"
  3. There are two things they should do to prevent these things from happening:

    first : only hire people that have proven that they can read and write, and it wouldn't be bad if they would know what they are doing.

    second: why don't they have a monitoring system that for instance blocks orders where the price is more than 10% away from the market?

    Schwartz can start writing an new book: Market idiots. He has already two potential candidates for this book.

    :D :D :D
  4. FredBloggs

    FredBloggs Guest

    so - if institutional traders are such hot shots with their ivy league (noodle league in japan) degrees, how come they are such a bunch of clowns?

  5. "Mizuho's brokerage wrongly put an order to sell 610,000 shares for 1 yen each, he said. It had intended to sell 1 share for 610,000 yen for a client."

    So did the order go through as 610,000 shares at 1 yen??? How could that be if the market price was closer to 610,000 yen? Wouldn't the system realize it was an invalid price or was it filled at market perhaps...
  6. thats about right.....
  7. ig0r


    Limit down. (15%)
  8. FredBloggs

    FredBloggs Guest


    1 yen from 610k yen is bigger than a 15% fall!!!

    it says there is a 15% limit on the upside - but clearly not a 15% limit on the downside.

    does seem a bit odd

    maybe its just another bit of the journalist getting their facts wrong - typical bloomberg
  9. Choad


    Yowza...and I thought I boned-up trades pretty badly sometimes!!! :D
  10. this is the most ridiculous thing I ever heard

    why in the world is not such a clearly erroneous trade busted ?

    is it because of japanese custom , or some stupid
    rule on exchange ?

    #10     Dec 8, 2005