Lehman Brothers, the Wall Street investment bank, has been fined £20,000 by the London Stock Exchange over an accidental multi-million pound trade that floored the FTSE 100 index in May.
The modest size of the fine reflects the LSE's assessment that the trade, which wiped 3.5 per cent from the index in the closing seconds of trading, was an accident and not a deliberate attempt to manipulate the stock market. The exchange has the power to fine firms whose behaviour threatens an orderly market.
Gontran de Quillacq, a trader, is thought to have keyed in an order to sell shares worth £300m – instead of £3m – during the closing auction at the end of what had already been a thin day's trading. The massive order caused the exchange's electronic share trading system to mark down shares in a plethora of blue-chip stocks, sending the FTSE down to what was then a shock low of 5,690.
The losses were reversed as soon as the market reopened the following day, although Lehman was left booking a £15m loss on the transaction.
The trade is believed to have been a so-called programme trade, where a selection of stocks is bundled into a specially-prepared electronic basket. While thousands of such trades take place daily, on this occasion, the dramatic plunge in the FTSE ignited fevered, though brief, speculation involving arbitrageurs and hedge funds.
Lehman and the LSE declined to comment yesterday.Reuse content