The 3 Billion Dollar Typo

Rand310 writes "Mizuho, the world's second largest bank based in Japan, with total assets of nearly the GDP of France (around 1.2 trillion USD) accidentally sold 610,000 shares, valued at $3.1 billion... for 1 yen each. A 27 billion yen loss would almost match Mizuho Securities' group net profit of 28.1 billion yen for the financial year ended in March, though... the incident would not threaten the brokerage's financial stability. FYI 1 yen is about .83 cents. Yesterday one share was selling at $5,065, today you could theoretically have bought 610,000 shares for $.0083 each. An expensive switch of variables."

Comments

Would be nice, but not really...

[KingSkippus]

No, the shares weren't actually sold for 1 yen each. From TFA:

No buyer was actually able to pick up the phantom shares for 1 yen due to market rules designed to limit price fluctuations, but the shares may have gone as cheaply as 572,000 yen ($4,750) each, a more than 9 percent discount to the intended sale price.

Selling the shares for 572,000 yen is where the 27 billion yen figure came from, not selling them for 1 yen.

Also...

...you could theoretically have bought 610,000 shares for $.0083.

Aside from the fact that you couldn't have theoretically bought the shares because of market safeguards already mentioned, that sentence is missing a very important word: 610,000 shares for $.0083 each.

Still, it would have been one helluva holiday sale, wouldn't it?

The other thing I thought was interesting was from the other article. It said:

The accidental order was 42 times bigger than the number of issued shares, but a computer warning of the misplaced order was overlooked.

How much yen do you want to bet that it's one of those stupid "Are you sure?" dialog boxes that everyone clicks "Yes" to without actually thinking about what it's asking? Ah, how I love ignoring those warnings, too.

Re:Would be nice, but not really...

[110010001000]

Yes, but if Slashdot was more accurate it would be less dramatic. The idea is to increase pageviews by posting hyped and controversial "stories" in order to increase revenue. This was probably a policy instituted by upper management to help the flagging LNUX (Slashdots parent company) stock price.

Haven't you noticed that as the stock price goes down, the hysteria on the front page goes up? Anything to make a buck!

Re:Would be nice, but not really...

[jjapan]

Actually the message box is rather large and declares the error very clearly. In addition it shows the details of what the action will do. Whoever did this really was either not watching or was using the safety net to enable some friends to make a killing. The news here interviewed day traders who made a lot of money on this deal. The blip lasted for about 3 minutes and was jumped on very quickly. The day traders referred to it as a "Christmas present". Investigation going on now. Be interesting to see what turns up.

Bust those trades

[seniorcoder]

Most exchanges will call the members who have accidentally benefited from another member's mistake and ask them politely to agree to void the deal. Although not obligated to do so, most brokerages typically honor this request as they have to assume that they will be the next ones to make a mistake.

Wasn't $3 billion...and wasn't a typo, either

[dmccarty]

Apparently not even the submitters are reading the articles these days...oh well.

For anyont who RTFA'd, 610,000 shares at 1Y were offered, not bought. The error so far has cost about $224 million, and may eventually cost $250 million. That's a huge cost for a trader error, but it's not $3 billion.

And I don't think this qualifies as a typo. How about "data entry error"? Or how about software bug, since the number of shares sold was more than the number of available shares.

Re:Give them my number

[generic-man]

From Mainichi News: "The accidental order was 42 times bigger than the number of issued shares, but a computer warning of the misplaced order was overlooked." (emphasis mine)

So many errors, so little time ...

[gordguide]

" ... accidentally sold 610,000 shares, valued at $3.1 billion ... for 1 yen each. ..."
No, they didn't.

" ... A 27 billion yen loss ..."
Huh? Nobody lost, or "won", anything. There were no trades at that price.

" ... FYI 1 yen is about .83 cents. ..."
This one, despite other posts to the contrary, is about right (today's rate is 0.00841 to the USD, or 0.841 yen = 1 cent). Considering the math proficiencey demonstrated so far, I'd give him a "close is good enough" checkmark on this question, to avoid the embarassing, and apparently inevitable, goose egg on his math final.

" ... today you could theoretically have bought 610,000 shares for $.0083. ..."
No you couldn't. And even if you could, you couldn't.

The company doesn't have 600 thousand shares outstanding to sell, for one thing; share owners must agree to sell at that price for another.
Pity the poor bastard who made a sell order "at market", though ;-).
Market rules prohibited the trade from being completed, for another. And that's about $0.0083 per share, it would have cost you about $US 5130.10 plus brokerage fees at today's exchange rate.

The short answer here, for those of you whose heads are exploding from the bad, bad Math and English Composition at work here, is some trader placed an order for one share, valued at around $5K, and made a mistake somehow.

Instead of an offer of one share for that price, the order was entered as 610,000 shares for the price of one share. As it turns out, some shares were sold at a discount of 9% (ie $US 4,750 per share; ie some owners were willing to make a sell order "at market" ) because the market rules allowed that much of a price drop before trading restrictions or outright halts kicked in (the news stories don't say what the mechanism for price monitoring is or does, but obviously, it works).