$600 Billion 'Fat Finger' Causes Deals Worth More Than Sweden's Economy To Be Cancelled
from the whoops dept
Techdirt has written before about so-called “fat finger” errors in the world of finance, where traders mistype and end up buying or selling huge quantities of stocks, often causing major losses to their employers. The London Evening Standard has a new fat finger story, but one with a couple of interesting twists:
Share trades worth more than the size of Sweden?s economy had to be cancelled in Tokyo today after what is believed to be the biggest ?fat finger? error on record.
It is thought to be the most extreme example of a trader in financial markets inputting hopelessly wrong figures while working under intense pressure. The identity of the trader is not yet known.
Orders for shares in 42 major Japanese companies, including household names such as Toyota, Honda, Canon and Sony, totalling 67.78?trillion yen (?381?billion [$600 billion]), were overturned, according to the Japan Securities Dealers Association.
Naturally, the most striking feature of this particular fat finger is its size: $600 billion, bigger than Sweden’s economy ($552 billion). The second unusual aspect is that this error cancelled sales by mistake, rather than make them. That was fortunate for the company concerned, since it probably limited the damage caused.
But even more than for the cases we’ve written about in the past, the fact that a single trader was able to make a mistake on this extraordinary scale, and that the system did not block or even query it in any way, suggests that the trading software is appallingly designed and the management dangerously lax. The fear has to be that, without robust systems in place to stop such actions, one day a fat finger might not simply cause a company to lose a big chunk of money, but take out an entire country’s economy — or even trigger the meltdown of the world’s financial system.
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Filed Under: fat finger, japan, stock market
Comments on “$600 Billion 'Fat Finger' Causes Deals Worth More Than Sweden's Economy To Be Cancelled”
Oh, there were certainly safeguards
Like “you are about to cancel the sale of (big list with one line being 542524 kshares of yyy).
Proceed?
[Cancel] [Yes] [Help]”
Personally, it still annoys me when one of the options to a question like “you are about to cancel/abort something. Are you really sure?” is “Cancel”/”Abort”.
I think it has cost my less computer-savvy mom some files that she did not vie for “cancel” in such a situation but went through the other options first.
It still annoys me and causes a double-take when I get those prompts.
Re: anxiclear
I think it has cost my less computer-savvy mom some files that she did not vie for “cancel” in such a situation but went through the other options first.
I’m sure some high-frequency traders made out like fat rats before the “error” was corrected.
“Small investors, as Reuters’ Felix Salmon writes, don’t place the kind of orders that high-frequency traders could attack, or would even find it worth their while to do so. The target of high-frequency trading is mostly institutional investors investment banks, pension funds, insurers, and so on — who trade in large volumes.”
http://www.vox.com/2014/4/15/5616574/high-frequency-trading-guide-real-problems-explained
This was definitely one of those large volume trades that high-frequency trading computer algorithms profit off. I remember similar fat finger errors happening a few years ago on the New York Stock Exchange, causing huge swings in stock prices due to all the high-frequency trading computers selling and buying stocks automatically.
The stock market is more like a casino with computers sitting around the Black Jack tables, than an investment platform. Computers buy a share of stock, hold onto it for 100 milliseconds, then turn around and sell it.
Re: Re:
High frequency trading is like putting an easily frightened cat in a room with random loud noises. Computers do not have the ability to decide what is really moving the market they respond to everything.
The other problem is that these high speed firms can cause markets to fluctuate then take advantage of it. Basically that is theft. I don’t think the market works for its intended purpose when hst is added. Prices need to be updated every 2-10 min for it to work right.
The computer-programmer point of view
“It is impossible to distinguish error from correct manipulation if both are too similar”.
In other words: if this trader usually does similar transactions, the computer system will have no possible way to filter out the ‘errors’…
They may be fast, but they can’t read minds (yet)
Re: The computer-programmer point of view
If computers can’t read minds, then they should read bodies.
Require 1lb of force for every $mil in a deal. Fat finger problem solved.
Re: Re: The computer-programmer point of view
will give a whole new meaning to FAT finger…
The fact that throwing information around, mistakenly, in one incident, can cause so much trouble is a core flaw of the system. Trading/financial markets have bigger mistakes in their very nature than a $600 bn fat finger. The input error wouldn’t mean much of anything without them.
Don't Question Normal Activity
Unless the $600b transaction was somehow out of the normal range of transactions, there’d be no reason for the software to question it. So, it’s always possible that it’s less abhorrent design and more a perfectly average transaction…
Re: Don't Question Normal Activity
$600b is far out of the normal range of transactions. That’s the Gross Domestic Product of South Africa, 25th in the world. The software could easily flag transactions considerably smaller than that and require confirmation.
I’m chuckling imagining a confirmation window:
“Are you sure you want to destroy the economy?” [Yes/No]
Was this involved?
http://www.vh1.com/celebrity/bwe/images/2009/08/dipping-bird-reprise.jpg
And now the fictional terrorist groups now know how to take down the U.S.
Screw the TSA, FBI or whatever acronym, the fatties will wipe themselves out with a glorious economic meltdown.
Re: Re:
Oh, great. Now we’ll have mandatory exercise and diet regimes “because terrorism”
$600 Billion "Fat Finger"
There are statutory requirements that regulate equity dealers and derivative
traders Buy and Sell Market Order process that prevent “fat finger”.by setting filters and parameters otherwise face penalties and enforceable undertakings from the regulator.The difference between a market maker and a creator of a market is loss of license and prison
Part of the legacy of flawed Internet Computer Technology is I can show
and prove malfunctions create gateways for customers to have
unauthorised access to another customers acounts and either by innocent
curiosity or fraudulent intent conduct unauthorized transactions.Often
companies with security breaches fabricate phantom hackers as the villian.
Where stems the cause of flawed internet computer technology? With tens
if not hundreds of millions of internet financial transactions occurring
each day inevitably 2 financial transactions are sent and travel over
the internet (latency)as electronic data and meet simultaneously at the
junction of a chip set(s) microprocessors within a computer. That
electronic data collides forcing chip sets to process electronic data in
a different way than how those chip set microprocessors have been
programmed to process financial data,[linear and non linear algorithms]
resulting in computer malfunctions and bad data processing of financial
detriment..
Flawed internet computer technology is not solely used by
all major global stock exchanges, stock brokers, hedge funds derivative
trading etc but also as all major banks coincide with equity dealers in
the business of stock brokering the same identical flawed internet
computer technology is used by banks EFTPOS and internet banking,
aviation flight centers, national shipping our defense forces and many
other commercial applications which regularly malfunction effecting on
occasions all persons nation wide. Payment of wages failing to be
deposited into accounts, funds transfer to pay bill failing, Bank EFTPOS
dispersing incorrectly large amounts of cash that do not belong to
customers. scheduled flights cancelled because of computer malfunctions
leaving thousands of passengers stranded at airports, and baggage unable
to be electronically located, shipping containers whose owners cannot
be identified and at what port the containers are stored, so that
customs are unable to check and release containers, leaving ships
anchored out at sea unable to unload because of back log effecting the
nations economy and many more examples too numerous to list all here
The enginutiy of US hedge funds and toxic mortgage debt caused the
Global Financial Crisis(GFC) a near collapse of the global monetary
system. An out of control major stock exchange automated electronic
share trading systems can bring about the collapse of any nations
financial systems as recently experienced on May 10 2010 with an
unprecedented -1,000 point free fall of the Dow Jones [DJIA] known as
the “flash crash”Flawed internet computer technology incorporated into
experimental electronic share trading system is the sole vessel for
delivering the Global Financial Crisis