Fat-finger error
A fat-finger error is a keyboard input error in the financial markets such as the stock market or foreign exchange market whereby an order to buy or sell is placed of far greater size than intended, for the wrong stock or contract, at the wrong price, or with any number of other input errors.[1][2][3]
Automated systems within trading houses may catch fat-finger errors before they reach the market or such orders may be cancelled before they can be fulfilled.[4] The larger the order, the more likely it is to be cancelled as it may be an order larger than the amount of stock available in the market.
Fat-finger errors are a product of the electronic processing of orders which requires details to be input using keyboards. Before trading was computerised, erroneous orders were known as "out-trades" which could be cancelled before proceeding. Erroneous orders placed using computers may be harder or impossible to cancel.[4]
Examples
Fat-finger errors are a regular occurrence in the financial markets:
- In 2006, a fat-finger error by a trader at Mizuho Securities in Japan caused the firm to short sell a stock in an error that cost the firm 40 billion Yen to unwind.[3]
- In 2014, a Japanese broker erroneously placed orders for more than US$600bn (£370bn) of stock in leading Japanese companies, including Nomura, Toyota Motors and Honda which was subsequently cancelled. If the order had been fulfilled it would have exceeded the value of the economy of Sweden.[5][6]
- In 2015, a junior employee at Deutsche Bank whose superior was on vacation confused gross and net amounts while processing a trade, causing a payment to a US hedge fund of $6bn, orders of magnitude higher than the correct amount.[7] The bank reported the error to the British Financial Conduct Authority, the European Central Bank and the US Federal Reserve Bank, and retrieved the money on the following day.[7]
See also
References
- ↑ Fat Finger Error. Investopedia. Retrieved 7 October 2014.
- ↑ Fat fingers. Nasdaq. Retrieved 7 October 2014.
- ↑ 3.0 3.1 ft.com/ lexicon. Financial Times. Retrieved 7 October 2014.
- ↑ 4.0 4.1 Lua error in package.lua at line 80: module 'strict' not found.
- ↑ Japan stocks rattled by $617bn 'fat finger' trading error. BBC News, 2 October 2014. Retrieved 3 October 2014.
- ↑ $617 Billion in Japan Stock Orders Scrapped After Error. Anna Kitanaka and Toshiro Hasegawa, Bloomberg, 1 October 2014. Retrieved 7 October 2014.
- ↑ 7.0 7.1 Lua error in package.lua at line 80: module 'strict' not found.
