Think you’ve got idiot peers at work? Well the award for this year has to go to this guy who’s trader typo sold 610,000 shares valued at $3.1 billion dollars at 1 yen (about a $1) each, resulting in a $244 million dollars. While technically it IS his fault, one really has to wonder WTF system designer let someone arbitrarily have THAT much control over a stock price. That’s scary that the trade desk software, especially in the billions of dollars would 1. allow a price that deviates from the standard deviation of the current price, and 2. allows the sale of such a huge block of trades without safegards. Most trade desks would sell such a block in smaller chunks to avoid tanking the price. The other theory could be that the system is so severely outdated that you can punch in anything. I’m guessing a 1/4 billion dollar loss will fix that issue. Press more for my cache of the article.

Mizuho loses $224m on typing error

TOKYO, Japan (Reuters) — Japanese brokerage Mizuho Securities scrambled on Friday to clean up the mess left by a trader who mistakenly offered tens of thousands of shares for 1 yen apiece, costing the firm at least $224 million.

Admitting to the massive error, the brokerage unit of Mizuho Financial Group said the trader entered what was intended to be an order to sell one share of J-Com — a staffing firm that made its market debut on Thursday morning — for 610,000 yen ($5,065).

Instead, 610,000 shares, valued at $3.1 billion at J-Com’s IPO price, were offered for 1 yen each.

The order represented more than 40 times the number of J-Com’s outstanding shares, which have a total market value of 11.2 billion yen ($93 million).

No buyer was actually able to pick up the phantom shares for 1 yen due to market rules designed to limit price fluctuations, but the shares may have gone as cheaply as 572,000 yen ($4,750) each, a more than 9 percent discount to the intended sale price.

Mizuho Securities president Makoto Fukuda said the brokerage had bought back most of the shares it sold. It is believed to be negotiating to buy back more shares — a painful task as buyers are likely to hold out for a hefty premium.

Mizuho’s error has so far cost the broker some 27 billion yen ($224 million), Fukuda estimated.

That could rise to more than 30 billion yen ($250 million) once the buy-back is completed, he said.

A 27 billion yen loss would almost match Mizuho Securities’ group net profit of 28.1 billion yen for the financial year ended in March, though Fukuda said the incident would not threaten the brokerage’s financial stability.

“It’s a monumental trading error, but fortunately this is a large bank with deep reserves,” said Jason Rogers, a credit analyst at Barclays Capital.

Apology
Fukuda visited Economics and Financial Services Minister Kaoru Yosano on Friday to apologize for the mess. He did the same at a press conference.

The Tokyo Stock Exchange said it was the first time an errant order had exceeded the number of outstanding shares.

Under exchange rules the order could not simply be cancelled, and there were no plans to change the December 13 settlement date for J-Com shares traded on Thursday, it said.

Analysts and investors are watching to see how Mizuho will get out of the unwanted trades. The Tokyo exchange suspended trading in J-Com all day on Friday and had not decided whether trading could resume on Monday.

“Most of the misplaced sell orders have been covered, but Mizuho still needs to buy a considerable amount of shares,” Tomio Amano, the exchange’s managing director, told reporters.

“We need to decide on a settlement scheme based on the worst-case scenario, considering how long the settlement could take and the possible impact on the market.”

Amano said the TSE could have Mizuho negotiate a liquidation price with each buyer, a method that has been used in the past when natural disasters disrupted trading. But the contingency has not been employed for 30 years and may not be relevant to current conditions, he said.

Many market players wondered how such an unrealistic order could have gotten through the TSE’s system in the first place.

“The sell order, which was more than the available shares, somehow went through the TSE system. The exchange cannot say that it has nothing to do with it,” said Masaru Ueda, head of the investment strategy division at Marusan Securities Co. Ltd.