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."

Comments

Nice...

[Anonymous Coward]

She gets fired, and they keep the stock as they expect to profit from it...
Why is she getting fired and not trained?

AXJZTOS

Re:Nice...

[Glonoinha]

Oh come on, anybody can make a typo. It isn't like she intentionally went on a quarter billion dollar buying binge - and come to think of it we are only talking about a $250M. She will get over it, and the company will probably make a tidy profit in the long term game. Personally I lean towards agreeing with the guy towards the top of the page suggesting it was simply a made up story to cover up some insider fraud - makes sense.

Now Nick Leeson, this guy is going to have a hard time living down his adventure in derivatives :

'Speculative trading in derivatives gained a great deal of notoriety in 1995 when Nick Leeson, a trader at Barings Bank, made poor and unauthorized investments in index futures. Through a combination of poor judgment on his part, lack of oversight by management, a naive regulatory environment and unfortunate outside events, Leeson incurred a 1.3 billion dollar loss that bankrupted the centuries old financial institution.'

It isn't every day you destroy a fundamental financial institution with a multi-century history.

Even harder to explain...

[moz25]

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?

Keyboard?

[debilo]

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?

Re:Keyboard?

[orenmnero]

Not necessarily. Professional trading systems often enter in order based on a lot size. You don't generally enter into a system how many shares you want, but how many lots you want. And lot sizes can vary and are often configurable for each terminal or even on a per stock basis. So for instance if you key in 250, if the lot size is 1000, you are actually buying 250x1000, or 250,000 shares. Who knows how the system was configured and if the lot size was displayed prominently in the UI (there are a lot of really bad trading UIs). One thing is for sure. Any competent risk management system would not have caught this.

Re:How can such a mistake be made?

[darkov]

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...

Re:safeguards?

[Uber Banker]

These things do exist. There should be a compliance/risk management system in place which does exactly

if amount > big_number

Fatally deny trade, refer to risk management

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.

Re:sanity checking

[Kent Recal]

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...

Re:Probably this is just a trick by Merrill Lynch.

[Anonymous Coward]

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.

Re:Probably this is just a trick by Merrill Lynch.

[toddbu]

Although I'm not quite ready to make the fraud connection yet, I have to admit that I too had problems with the numbers that were listed. In addition, I was troubled by the phrase that "... the trader was unfamiliar with new computer systems". This doesn't sound right to me either. Would you really give this much authority to someone who wasn't adequately trained, or who was trained and couldn't demonstrate the key ability to execute a trade?

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?

Re:Probably this is just a trick by Merrill Lynch.

[xoboots]

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.