$224m typo shakes Tokyo exchange

The Tokyo Stock Exchange is facing calls for tighter controls after a botched trade saddled a securities firm with a loss of more than $224 million and briefly wreaked havoc on Asia's biggest bourse.

    Many traders snapped up the chance for a quick profit

    Mizuho Securities said an input error by one of its dealers meant it accidentally tried on Thursday to sell 600,000 shares in J-Com, more than 41 times the number of the Osaka-based telecom outsourcing firm's outstanding stock.

    "We must take action to prevent another mistake," Prime Minister Junichiro Koizumi said on Friday. "I want people to think of measures not to repeat the same kind of mistake."

    Mizuho Securities President Makoto Fukuda told reporters that the blunder would cost the firm "at least" 27 billion yen ($224 million) and some reports suggested it could be substantially more.

    The brokerage arm of Mizuho bank "put in sell orders for 610,000 shares at one yen instead of one share at 610,000 yen," Fukuda told a midnight news conference on Thursday after a day of chaos.

    For others in the market, the error was a chance to make a quick profit.

    Last month, computers at the
    Tokyo stock exchange crashed

    "Everyone in the market instantly knew the order was a mistake so some clever guys predicted that Mizuho Securities would have to put in a massive buy order later," said Hideo Mizutani, chief market analyst at Sieg Securities.

    The turmoil is also yet another embarrassment for the Tokyo Stock Exchange, which last month was forced to suspend trading in all shares for the first time ever after its computer system crashed.

    Although the latest problem was apparently the result of human error, many observers questioned whether the exchange's controls are adequate.

    Overhaul

    "I think the accident is a good opportunity to overhaul the rules in stock markets in Japan as this kind of mistake could happen again in the future," said Mizutani.

    "For example, it is worth considering rules on shares which show unusually big price fluctuations, or rules on a deal that obviously was made by mistake."

    Japanese media said the rising popularity of online trading exacerbated the losses for Mizuho as news of the blunder quickly spread over the Internet.

    One investor wrote on a bulletin board: "Do all you can to buy J-Com! I'm having fun!" Another said: "I racked up five million yen in an instant but I feel as if I was doing something wrong."

    "I racked up five million yen in an instant but I feel as if I was doing something wrong"

    Investor comment on Japanese bulletin board

    Risk evaluator Standard and Poor's said its credit ratings on banks in the Mizuho Financial Group would not be affected by the erroneous sell order.

    "Although the loss is likely to increase as the brokerage completes share buy backs, Standard and Poor's believes it will not impact on the credit quality of the Mizuho group banks given the group's overall health." 

     

    It said a 27 billion yen loss would have a big impact on Mizuho Securities' net profit, which totalled 19.5 billion yen in the fiscal first half, but that the firm would probably receive support from the Mizuho group.

    Back-tracking

    J-com saw its opening price of 672,000 yen fall within minutes Thursday to its limit low of 572,000 yen before rallying up to the limit close of 772,000 yen, apparently as Mizuho tried to reverse its mistake.

    Chaos ensued as the market tried to figure out what happened, bringing down shares in the brokerage sector.

    The benchmark Nikkei-225 index tumbled 1.95% in Thursday's trade, largely on profit-taking after recent gains.

    Shares of Mizuho Financial, whose group includes Mizuho Securities, tumbled 31,000 yen or 3.4% to 890,000 on Thursday.

    But calm returned to the market on Friday, when the Nikkei-225 gained 220.69 points or 1.45% to close at 15,404.05. Mizuho Financial added 18,000 yen or 2% to 908,000.

    The Tokyo Stock Exchange suspended trading in J-Com shares on Friday to prevent further chaos.

    SOURCE: AFP


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