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Jan 3, 2007

The ¥40bn typo

Does it matter if I offer to sell 610,000 things at 1 Yen each instead of 1 thing at ¥610,000? Errr, yes it does, especially if I'm a broker trading shares live on a busy Tokyo Stock Exchange. The broker's typo cost Mizuho Securities, Japan's second largest bank, ¥40.7bn (approximately US$340m) in charges to buy back the shares. The broker tried four times but was unable to cancel the trade due to 'a problem' with the exchange systems. In a typically Japanese form of accountability, the president, IT head and managing director/executive officer of the stock exchange all resigned, the cock-up following hard on the heels of earlier 'technical problems' i.e. capacity constraints, availability failures and functional limitations of the exchange's dealing systems.

It seems curious to me that the apparent lack of data validation on the brokerage's own systems is not even mentioned in the news reports. Being such as cheap price and more than 40x the actual number of shares in the company, the sell offer was so far out of whack with reality that the brokers' systems (both buyers and sellers) should have flagged it as a probable typo if not trapped the deal pending confirmation. It can't be easy to validate trades in such a high-pressure environment where occasional deals are bound to be outlying data values but surely if must be feasible to impose some pragmatic limits?

More links on integrity, incident management and accountability