A week ago, a typing error at Mizuho Securities cost the bank a fortune, as a trader sold 610,000 shares in J-Com at ¥1, instead of 1 share for ¥610,000. As anyone who has paid on-line will know, there is always the doubt and double-checking before you hit "submit". In an ideal world, the trade would have been automatically blocked by the system, but it is not that which bothers me. Other traders watching their screens noticed this very unusual trade, and acted instinctively, buying J-Com shares at a discounted price as fast as they could. That is their training. It could have been over within minutes. Then of course Mizuho has to buy back the shares to honour the trade. It is said to have cost the bank over $300 million. That would go a long way in Kashmir.
Could a trader act otherwise (and keep his job)? They are trained to spot and use opportunities, and computers are programmed to do much the same, and may well have beaten them to it. But after the flurry of dealing, it must have been apparent to all that a mistake had been made. If you took advantage of an individual in this way, you would be reviled, yet to do the same of a corporation seems inevitable and acceptable.
Lehman Brothers may yet decide to return the profit it made, and other Japanese banks will be under moral pressure to do the same, but at the moment it still looks like a very expensive mistake for Mizuho. We should spare a thought for the trader!
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