The age of electronic execution has brought with it a niggling problem – fat fingered trading. A fast-paced, stressful trading environment creates an ideal incubator for hatching mistakes. They are often simple mistakes and involve pressing the wrong key on the keyboard, possibly at the wrong time and/or even for the wrong thing.
Anecdotal evidence would have us believe that fat fingered trading is rife. Real-life fingers pushing the wrong buttons include incidents as recent as January when human error caused the Canadian dollar to slump in Asian trading hours. The U.S. dollar shot up from around C$0.99 to over C$1.0030 against the Canadian dollar before immediately dropping back down, Reuters reported. The spike in the rate had little long-term impact on the market as a whole.
These sorts of mini-flash crashes happen on a regular basis in many instruments.
Higher profile fat fingers include:
- In September 2006 a Bank of America trader’s keyboard was set up to execute an order when a rugby ball landed on it and executed the $50 million trade ahead of schedule.
- In June 2005 a Mizuho Securities Trader sold 610,000 shares at one yen instead of one share at 610,000 yen at a loss of approximately $225 million.
- In October 2002 a Bear Sterns trader caused a 100-point drop in the Dow Jones Industrial Averagte after entering a four billion share sell order rather than four million.
- In May 2001 a Lehman Brothers dealer in London wiped £30 billion off the FTSE when he inadvertently keyed in £300 million for a trade instead of £3 million, causing a 120-point drop in the FTSE 100.