The Typo That Cost A Quarter Of A Billion Dollars (At Least)

from the double-check-your-data dept

Earlier this year, we had a story about a Taiwanese stock trader who made a typo on on a new trading platform her company was using -- costing the firm $251 million. We were surprised that any kind of equities trading software wouldn't have controls to catch such trades, but apparently not. Now we have yet another example. Head up to Japan and you find a case where a trader who might not have had enough caffeine swapped the number of shares he was trying to sell with the price, so that instead of selling one share for 610,000 yen ($5,065), he tried to sell 610,000 shares (40 times the outstanding shares) for (yup) one yen. The system was smart enough not to let the sale go through for one yen, but it did sell many shares at a steep, steep discount. The company whose equity was at stake was having their IPO, so they couldn't have been particularly thrilled. The investment bank, Mizuho Securities, has been scrambling to buy back all the shares they sold -- at a huge premium. So far, the estimates are that the bank has lost $224 million for this little typo. So, with two examples in just a few months showing how little trading typos lead to quarter of a billion dollar losses, don't you think someone might look into making the software that traders use a bit... uh... smarter?


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  1.  
    identicon
    Anonymous Coward, Dec 9th, 2005 @ 10:58am

    No Subject Given

    How hard would it be to have the software check the last price of the security, and add a confirmation screen if the submitted limit price was too far out of whack?

     

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  2.  
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    Anonymous Coward, Dec 9th, 2005 @ 11:07am

    No Subject Given

    And yet, you have a typo in the article title.....

     

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  3.  
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    Anonymoose, Dec 9th, 2005 @ 11:18am

    No Subject Given

    The typo that made headlines! ^^ Not meaning just the quarter of a million dollars.... :-)

     

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  4.  
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    Mike (profile), Dec 9th, 2005 @ 11:18am

    Re: No Subject Given

    And yet, you have a typo in the article title.....

    Didn't cost me a quarter of a billion, though. :) Thanks, it's fixed now.

     

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  5.  
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    Andrew Strasser, Dec 9th, 2005 @ 11:19am

    Re: No Subject Given

    Tis humorous indeed. Everyone makes mistakes. You would think trading software would at least make you click more than once to spend money and give you a detailed description of what you're doing before you do it. Though it's no ones fault but tyhe companies who have had the problem as basically if they would have bought software that cost more with a few bells and whistles it may have saved them a quarter of a billion dollars. Stupid mistakes can cost millions. I

    t's worth an extra prolly 50 or 100 bucks to know you'll be asked twice before you ever do anything. It may be annoying to some and you may even have to go as far as a company to make sure that it's not turn-off able. Either way you deal with the issue though the company screwed up bought faulty software without safeguards. An employee made a minor mistake that cost millions. It would have cost maybe 1/250,000th of that to be sure that there was and never would be any way a mistake like that can happen.

     

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  6.  
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    Rikko, Dec 9th, 2005 @ 12:44pm

    Re: No Subject Given

    Oh, I thought the title typo was a joke.. Here I was laughing aloud at something that wasn't even a joke....

    Change it back!

     

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  7.  
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    Mike (profile), Dec 9th, 2005 @ 1:11pm

    Re: No Subject Given

    Ha! I should have just claimed it was on purpose... but, no, it really was a typo.

     

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  8.  
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    Seth Finkelstein, Dec 9th, 2005 @ 11:11pm

    More complicated design issue that it seems

    Just asking for confirmation is going to be worse than useless, as the fast-typing traders will get in the habit of automatically doing the "OK", if not demanding it be disabled.

    Moreover, when any confirm gets in somebody's way, it'll be blamed for a loss - but when it prevents an error, there won't be any credit.

     

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  9.  
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    Just one guy, Dec 10th, 2005 @ 1:56am

    Re: No Subject Given

    Aarghh, now I'm curious: what was the original title, then? I missed it, and I want it back!

     

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  10.  
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    Just one guy, Dec 10th, 2005 @ 2:17am

    Re: More complicated design issue that it seems

    ... not quite, and Anonymous Coward had it right:

    How hard would it be to have the software check the last price of the security, and add a confirmation screen if the submitted limit price was too far out of whack?

    The issue here is not to have an alert show up for every little operation you do... but rather, to identify unlikely operations, and ask for confirmation for these only.

    Alan Cooper addresses this issue when discussing of possible vs. probable tasks in his "About Face" book, whereby for the average programmer all possible actions are equivalent and need to be granted equivalent interface complexity to pursue, on the ground of the fact that someone might need all of them sooner or later, while the smart programmer knows what's likely and what's not, and eases the interface for likely actions, to the expenses of unlikely ones.

    In practice, in this case it would not be hard to implement a verification system that checked the likelyhood of the proposed transaction against a set of rules or previously approved operations, and asks for a confirmation when it goes out of the acceptable boundaries. BTW, it would make sense to add layers and layers of approval screens, and even the approval of a supervisor, as the proposed transaction becomes unlikelyer.

    To sell for one yen (less than one USD cent) a share whose expected price is 5,000 USD, and to try to sell 610,000 shares, when the total amount of available share is 15,000, should have activated some serious confirmation screens indeed!

     

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  11.  
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    Seth Finkelstein, Dec 10th, 2005 @ 2:41am

    Re: More complicated design issue that it seems

    Still, the traders will complain about the false positives. There's times when large blocks of stock really do get traded quickly, on rapidly varying prices. This is such an extreme case that it's easy to point at it, but that's hindsight. The problem is that the trading task is often very fast-moving.

     

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  12.  
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    Anonymous Coward, Dec 10th, 2005 @ 9:01am

    Warn if the current bid is out of whack with the a

    The obvious solution is to accept any order that is within 10% of the current selling price without comment and query any price outside these bounds. This way one will rarely have a false alarm and yet wrong entries will be challanged.


    A better way might be to multiply the difference between the new price and the current trading price by the number of shares and warn if this anount is larger then some threshold, say $10,000. This would have few false positives but would stop all the big mistakes. This has the advantage of warning about the size of the dollar loss. i.e. Setting 10 share for 1 cent instead of a 43 is noise. But selling 10,000,000 share for $8.91 instread of $9.81 is a loss of over $1,000,000

     

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  13.  
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    Mike (profile), Dec 10th, 2005 @ 12:33pm

    Re: No Subject Given

    Aarghh, now I'm curious: what was the original title, then? I missed it, and I want it back!

    I misspelled Quarter as Quater. If I was going to intentionally do a typo, that one was fairly subtle. Oh well. Next time I'll make my typo better. :)

     

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  14.  
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    Boo, Dec 12th, 2005 @ 3:36am

    Bangalored?


    i have a good friend who works for an investment bank in London who does nothing but writes proceedures and checking mechanisims on the traders software to prevent this stuff happening. It's down to a fine art. I find it amazing that this kind of error is still happening - i'm willing to bet the the checking mechanisim was "Bangalored"!

     

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