December 9, 2005
Botched Trade Costs Tokyo Brokerage Approximately $225M
Posted by Jason R. Job
Hans Gremiel, a writer for the AP, wrote an article about how the Japanese government has rebuked the Tokyo Stock Exchange and Mizuho Securities Co. over a typographical mistake cost Mizuho Securities over 27 billion yen, which equates to approximately $225 million. (Article can be found here).
Basically, a trader for Mizuho Securities wanted to sell one (1) share of J-Com Co. on Thursday morning at 610,000 yen. However, the trader incorrectly typed the trade in to sell 610,000 shares at 1 yen. J-Com Co., a job recruiting firm, was debuting on the Tokyo Exchange with approximately 15,000 shares being offered. Nevertheless, the Tokyo Exchange processed the sale of J-Com, even though the sale was approximately 41 times the number of outstanding shares.
According to the article, this sale cost Mizuho Securities at least 27 billion yen, but since it occurred through human error, that amount could easily increase. Additionally, Mizuho Financial Group, the parent of Mizuho Securities and Japan's second largest bank, stated that they would fully back the losses from the erroneous trades of J-com, which could wipe out Mizuho Securities' first quarter profit of 28 billion yen, or $233 million.
I wonder if this trader was invited back for another day of trading? Nevertheless, shouldn't the exchange caught this wacky trade?
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