'Fat finger' trade costs Tokyo shares boss his job
Wednesday 21 December 2005
The head of the Tokyo Stock Exchange has resigned over a £190m trading error that has damaged confidence in Asia's largest stock market.
President Takuo Tsurushima and two other senior exchange executives apologised to investors yesterday for the "confusion" caused earlier this month when the TSE's trading system failed to block a sell order for 610,000 shares at Y1 (0.5p) apiece.
The fiasco was caused by a so-called "fat-finger" keyboard error by an employee of Mizuho Securities, who had only intended to sell one share in a manpower recruitment firm, J-Com, for 610,000 yen (£2,970). The sell order was more than 40 times larger than the firm's 14,500 outstanding shares.
Mr Tsurushima said the TSE, which was forced in a separate incident on 1 November to shut down for the first time since 1949 after a computer glitch, would "try its best to gain the trust of the market". He said: "I feel gravely responsible."
Mizuho, which was forced to buy back the shares at a higher price, could end up with a bill for more than Y40bn (£194m) according to Japanese financial reports, wiping out more than three months' net profit. One executive said the incident was a "disaster".
Some of the windfall, dubbed the "blunder plunder" by the press, was received by two local traders, who made a combined Y2.6bn (£12.5m). Another man, Takashi Kotegawa, 27, who is officially listed as "unemployed" in finance ministry documents, made a Y2bn profit. "I still haven't decided how to spend it," he said. He had previously racked up losses of up to Y100m (£500,000) a day and said he was close to despair.
Half a dozen large Japanese and foreign investment banks that made a killing in the two-minute chaos which followed the computer operator's lapse in concentration have reportedly agreed to return Y16bn. But many smaller brokerages and investors say the bonanza was made legally and are resisting pressure by the Japan Securities Dealers Association (JSDA) to pay it back.
If the smaller firms continue to hold out, the bigger investors may pull out too, throwing the JSDA plan to solve the crisis into chaos.
The TSE and Mizuho have spent much of the past two weeks squabbling over who is responsible. Mr Tsurushima's resignation is seen as a sign that the bourse accepts its stock trading system was to blame for blocking Mizuho's attempts to reverse the sale.
The debacle comes as the Japanese stock market enjoys a record-breaking bull run that has pushed shares to five-year highs, creating concerns that the exchange is struggling to handle the large volume of trading ahead of its own public share-listing next year.
In just one day last month the TSE handled a record 4.5 billion shares and many observers say the volume is likely to grow as Japan's recovery continues, straining the computer systems to breaking point. "I question what will happen if a terrorist attack or a huge earthquake hits the bourse," Toshihiro Nagahama, a senior economist at Dai-ichi Life Research Institute, said.
Although the computer blunders have failed to dent Japan's recovery, after more than a decade of false starts the Financial Services Agency is taking no chances and has ordered the TSE to prevent a recurrence to avoid damaging the reputation of the market abroad. The economic and fiscal policy minister, Kaoru Yosano, said the incident had "shaken confidence" in the system. To make matters worse, several other smaller exchanges around the country have also experienced computer problems over the past year.
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