| What the *Bleep* is a Fat Finger Trade? Is This | | | | world's largest derivatives market, halted trade for |
| Some Hoodwinking by the Press? | | | | three hours and caused its index to fall 500 points |
| CNBC, Bloomberg, and various other audience-starved | | | | after an unidentified London trader entered the |
| media outlets reported this afternoon rumors of a | | | | wrong price during a futures transaction. |
| typo causing the micro crash between 2:40 and 3:00 | | | | - September 2002: A Eurex trader intended to sell |
| PM EST today on the American equity indices. | | | | one futures contract when the DAX, Germany's |
| | | | index of leading shares, reached 5,180. Instead, he |
| The incident, which strangely even you or I couldn't | | | | sold 5,180 contracts, sending the market into a free |
| duplicate on our retail trading platforms but which a | | | | fall. Five hours later, the exchange announced the |
| bank that spends hundreds of millions on internal | | | | cancellation of a raft of other trades. |
| controls, risk management and middle office geeks | | | | - December 2001: A trader at UBS Warburg, the |
| couldn't prevent, is being referred to as the "fat | | | | Swiss investment bank, lost £71 million in seconds |
| finger trade." | | | | while trying to sell 16 shares in Japanese advertising |
| All sounded kind of iffy to me until I did some | | | | giant Dentsu at 600,000 yen each. He sold 610,000 |
| research and found out that there have been other | | | | shares at six yen each. |
| incidents not extremely different than the one that is | | | | - May 2001: A trader at Lehman Brothers mistyped a |
| being reported. Allow me to explain... | | | | trade and wiped £30 billion off the stock market. |
| A fat finger trade occurs when a trader accidentally | | | | He wanted to sell £3 million of stock but typed too |
| buys / sells more securities than he or she had | | | | many zeros and sold £300 million. The bank |
| intended to. It's called a fat finger because when the | | | | attracted a £20,000-fine. |
| trader types in the number of securities to buy/sell, | | | | - November 1999: A dealer put his elbow on the |
| his finger hits an extra number or two, and ends up | | | | keyboard and inadvertently placed 600 trades in |
| buying / selling 10 or 100 times more than he/she had | | | | 16,000 of the Premier Oil's shares at 19p, worth more |
| intended. | | | | than £1.8 million. |
| Typically, a fat finger can be spotted by a `spike.' An | | | | However, the record in fat finger trading is held by a |
| abnormally large number of transactions hit the | | | | trader of Japan's Mizuho Securities (apparently until |
| market and get executed at the start of the spike. | | | | today that is - I bet Mizuho's trader is feeling better): |
| Here's a collection of fat fingered trades for your | | | | - The trader had managed to sell shares worth £1.6 |
| reading pleasure: | | | | billion in a local recruitment agency, J-Com, which had |
| - February 2005: A broker tried to sell 15,000 shares | | | | just been floated and had a market value of little |
| in music publisher EMI at 280¼p but instead placed | | | | more than £50 million. The December 8, 2005, "sell" |
| an order for 15 million in a transaction worth £41.5 | | | | order, was mistakenly placed for 600,000 shares, |
| million. | | | | despite the fact that J-Com had only 14,000 shares |
| - April 2003: A trader accidentally bought 500,000 | | | | in issue. The order had created chaos in the market |
| shares in GlaxoSmithKline, the pharmaceuticals group, | | | | and had resulted in a 301-point fall on Japan's main |
| at £13 each when the market price was 70p less. | | | | stock market index, the Nikkei 225. |
| - November 2002: A market maker confused the | | | | Now, if everybody in the brokerage world can kindly |
| price of Ryanair shares in euros and sterling, sending | | | | sit on their hands tomorrow, maybe we retail |
| the London quote up more than 61 per cent, from | | | | investors can actually manage to come home and |
| 404.5p to 653.7p. | | | | not have a heart attack. Thank you kindly... |
| - October 2002: A keyboard error at Eurex, the | | | | |