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 -- whether they’re a human or a 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.
BNP’s $3 Billion Wipe Out
BNP Paribas Securities was blamed for erroneous orders that knocked almost 10 percent off the value of Formosa Petrochemical Corp. in March 2018, Taiwan’s third-largest stock at the time, according to a senior official with the island’s bourse. About $3 billion was erased from Formosa’s market value as a result of a cascade of trades during the closing auction, which were caused by a bug in BNP’s system, the official said at the time.
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.
The $617 Billion Bidder
In October 2014, someone placed more than 40 erroneous orders totaling 67.8 trillion yen ($617 billion) on Japan’s over-the-counter market -- greater than the size of Sweden’s economy at the time. The attempted transactions included a bid to buy 57 percent of Toyota Motor Corp.’s outstanding shares and other big stakes in Japanese blue chips including Honda Motor Co., Canon Inc., Sony Corp. and Nomura Holdings Inc. The orders were canceled before they were executed.
Goldman’s Options Disruption
Confusion swept across trading desks in August 2013 as prices for equity derivatives swung without reason, with some contracts trading for $26 one minute and $1 the next. The culprit was Goldman Sachs Group Inc., which experienced software errors causing the firm to spew unintentional orders from the first moments of trading, according to a person briefed on the matter. An internal system used to help prepare to meet market demand inadvertently produced orders with inaccurate price limits and sent them to exchanges, the person said.
UBS & Capcom
UBS Group AG said its Japanese unit mistakenly ordered 3 trillion yen of Capcom Co. convertible bonds in February 2009, almost $31 billion at the time. That was 100,000 times more than it intended, according to the bank, which cited an internal system error. The trade on the Tokyo Stock Exchange’s ToSTNeT system was canceled at no cost to UBS.
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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