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Memba Ben By Memba Ben, 10th Dec 2016 | Follow this author | RSS Feed | Short URL
Posted in Wikinut>Guides>History

How an error cost a company $225 million by selling 610,000 shares instead of one.

A Japanese trader fucks up BIG time.

The stock market has always been a rollercoaster ride with record breaking highs and lows. It’s always been a high risk, high reward system, especially with regards to the risk of losing money.

Because of the high risk nature of trading, there are safeguards that were implemented to help people:
•You only pay the ask/bid spread.
•You can dictate when you want to trade and how the trade will go.
•You can trade on leverage, but this will increase risk.

However, even with these helpful additions, people must ALWAYS be triple sure of what they are doing otherwise their entire livelihoods could be gone in a matter of minutes.

You would think that a professional trader working for an investment bank would understand all of this, but then again, we are all susceptible to a mistake every now and then.

I mean, I make mistakes all the time.

I’m just glad none of my mistakes cost 27 billion yen.

In 2005, a Japanese trader for brokerage firm Mizuho Securities fucked up a trade where he sold 610,000 shares for 1 yen instead of selling one share at 610,000 yen as he was supposed to.

When the company execs found out, they did everything they could to cancel the trade (another trader tried to cancel the order three times) but the Tokyo Stock Exchange laughed them off, issuing a statement that they don’t cancel transactions even if they were executed on error. This forced the company to buy back the shares at an inflated cost.

That error caused the company $225 million in damages and rolled the market, contributing to a 1.95% drop in the Nikkei 225 index.

The error also managed to almost wipe out the company’s first quarter profit of $233 million.

There are many lessons to take from this. The most important being to remember to keep in mind that there will always be a high risk of loss. A person should carefully consider their options.

Lastly, ALWAYS check for errors before authorizing a trade!


Big Mistake, Business, Humour, Trading

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author avatar Memba Ben
A fan's view on the business of football.

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