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A $251 Million Typo
theodp writes "A Taiwan stock trader is jobless after a typo left her company looking at a paper loss of more than $12 million when what was supposed to have been a small order mistakenly resulted in a $251 million purchase. 'Something like this is difficult to explain to superiors,' a company exec explained."
She gets fired, and they keep the stock as they expect to profit from it...
Why is she getting fired and not trained?
AXJZTOS
What's even harder to explain is how 1 person from 1 keyboard has the power to kill a company. Do they have to seize the moment that desperately that even a simple check cannot be done?
see a Text Widget
This story is so short on details that it's hard to comment, but when I compare
A Taiwan stock trader mistakenly bought $251 million worth of shares with a misstroke of her computer keyboard
to
Fubon said that the trader was unfamiliar with new computer systems,
I wonder if I missed a revolution in keyboard technology that made it impossible to adapt to "new systems" quickly?
This article is about Huong Tee, who was just fired from a New York Stock Exchange broker earlier this year for doing the SAME thing with Mutual Funds. Same explanation was given, although the NY Financial Times said something about foreign exchanges being a potential target for this next, and what do you know here it is.
This is called a eastman scam BTW, named for the person who did it first with two international markets.
The article does nothing to explain the international tie and why this exploit is being done. It has to do with currencies and values of multiple companies in multiple markets simultaneously. There were probably 20 other stocks involved at a smaller degree.
You know when you just did rm -rf /usr/bin/unwantedfoo/.* , and theres that nasty second when the hairs on your neck bristle while the thought is slowly forming in your head about the dot might be in the wrong... oh shieee ... and rm is quietly recursing its way UP the tree!! ?
You want a rewind button?
Most of the big mistakes in life you realise in the one or two seconds after you did them.
When I worked in a radio station we had a delay line between live callers and the feed to air. Why? Because when some loon started ranting and swearing the producer could hit a kill button and none of it would go out.
Now, when every keystroke has the potential to kill the company the very least they should have is a buffer on transactions, and a switch up in the main office to blow away any transactions in the buffer. Thats the very least they could do.
type-o allows suspect to go free
The systems I have used do confirm your order, but like many such confirmations they're of little value since you reflexively click through them. The real problem is that they let an inexperienced trader trade a huge order. Their systems should have reasonable limits on trades. It is a general problem though because what is reasonable can still be huge. Customers ring up and make $2Bil orders routinely in government bonds and the like.
This actually happened to me once - I bought 100,000 of a derivative instead of 10,000 using an online system. Interestingly the issuer's trader noticed that I had put most of them straight back on the market and rang my broker who rang me and asked me if I wanted to reverse the transaction. Very thoughtful of him...
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if amount > big_number
Its not hard stuff. Most finance companies (from my experience) do have safeguards in place, the fact this one doesn't has done far more than give it a $12m loss, it has warned the market that this company has lax risk controls and higher risk charges should be applied to it.
The trader should get fired, they are employed and payed to do an accurate job. The compliance officer should also get fired, because the buck stops with them.
Mod parent up.
He's dead on.
Not the trader should be fired but the manager who failed to check (or rather: ask someone to check...) their system for fundamental flaws like that.
Typo's happen. Mistakes generally happen when humans are involved.
Critical systems must be designed to deal with that and firing the poor soul who got fucked over by this broken system is not going to fix it.
A simple keyjam can turn 10mio into 1000mio anytime...
You're correct in that at this point it's only an unrealised or, as you put it, paper loss.
But there is also Opportunity Cost to consider; the benefit forgone as a result of pursuing one course of action rather than an alternative course of action.
They are planning to hold the securities, but we don't know their cost of capital (aka their borrowing rate, important as it's likely this is a leveraged positiion). Nor how much capital this particular trading desk has to play with; the amounts involved may in fact be a large percentage, in which case just by holding this position they won't be able to acquire other, perhaps more profitable trading positions.
We also don't know much about this particular trading desk, their style. Are they monentum traders? Was this particular position one leg of some complex arbitrage?
Their losses could potentially be much, much larger and the impact immediate. It's pretty bizzare that they are planning to hold a position 20 times the size of the one they originally planned to take on. That's gotta really unbalance their overall portfolio.
I've worked on trading desks and these mistakes happen a lot, far more often then most folks realise, and rule number one when you make a mistake like this:
Unwind the position immediately!
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I wonder if the user interface was in Chinese. In Chinese, the characters for buy and sell look similar. Yes, a Chinese person could easily tell them apart, but I can understand that after many hours of staring at a computer screen, one's eyes or brain might get tired and slip up.
To add to the confusion, their pronunciation differs only in tone! When I was younger, I once asked my dad to sell my HP stock. He misheard me and bought some instead. I'm sure that this is not the first such misunderstanding that has occurred in Chinese.
How is this even remotely insightful?
Let's see, jump from a claim that this is 'publicity for Merrill Lynch' (WTF!?) to an accusation that this is some massive fraud perpetrated between Fubon and Merrill Lynch (which must be so blindingly obvious to the poster since he/she backs this up with, well, zero facts and much wild speculation).
Then a non-sequitur about Fubon Securities stock rising a miniscule amount.
Then a litany of guilty-by-association links.
Then more wild speculation (Oh, there are books about it! No one who writes a book could lie, or be mistaken, or be a fucking inept retard!).
So this poster makes the four thousand leaps of faith from typing error to widespread corruption, and gets modded insightful.
Riiiiiiiiiiiiiiight.
It's possible that there's fraud here, and as such should probably be investigated. But it's also possible that it's a case of CYA and the trader was on the losing end. After all, how do you explain the phrase "Something like this is difficult to explain to superiors" by "a Fubon executive"? Could it just be that he's trying to cover his own incompetence in managing his people?
If you don't want crime to pay, let the government run it.
Finally someone who is reading with a critical eye. A $251 million dollar typo? I think not. A $12 million dollar paper loss? Considering that they don't plan on selling the stock, their unrealized profit or loss is rather speculative.
Not knowing all the facts of the case, I'm not willing to jump into the premise that there is a larger multi-corporation conspiracy involving Merrill Lynch but it is almost certain that the Taiwanese trading firm is not telling the truth and that this is a cover story.
Just goes to show how guilable people are. Tell them any old story--no matter how ridiculous--and not only will they believe it, but they will also defend it.
Now, as for the claim that "most of what is written about the financial markets is fraudulent in some way" -- you care to back that up? Because thats a statement with almost no content other than a manipulative intent to induce the reader to distrust what is written about the markets. Even if the fraud tally is "billions of dollars", that is a small fraction of the overall market size and furthermore, your claim wasn't about fraudulent market activity but rather fraudulent writings concerning market activity. Which is all very confusing.
I think caution should be taken when extrapolating from a single instance of what _appears_ to be a non-truth. The fact that a given firm is making dubious claims does not necessarily imply or play into larger conspiracy themes.