A fat-finger error is a keyboard input error or mouse misclick in the
financial market
A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial market ...
s such as the
stock market or
foreign exchange market whereby an order to buy or sell is placed of far greater size than intended, for the wrong stock or contract, at the wrong price, or with any number of other input errors.
[''Japan Times''. Retrieved 7 October 2014.]
/ref>
Automated systems within trading houses may catch fat-finger errors before they reach the market or such orders may be cancelled before they can be fulfilled. The larger the order, the more likely it is to be cancelled, as it may be an order larger than the amount of stock available in the market.
Fat-finger errors are a product of the electronic processing of orders which requires details to be input using keyboards. Before trading was computerised, erroneous orders were known as "out-trades" which could be cancelled before proceeding. Erroneous orders placed using computers may be harder or impossible to cancel.[
]
Deadlines for review & cancellation
In order to have legal certainty at the stock exchange, all exchanges have tight deadlines to request a review and cancellation, if possible. At the NYSE
The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...
, BATS
Bats are mammals of the order Chiroptera.''cheir'', "hand" and πτερόν''pteron'', "wing". With their forelimbs adapted as wings, they are the only mammals capable of true and sustained flight. Bats are more agile in flight than most bir ...
, CBOT, NASDAQ, OMX
Nasdaq Nordic is the common name for the subsidiaries of Nasdaq, Inc. that provide financial services and operate marketplaces for securities in the Nordic and Baltic regions of Europe.
Historically, the operations were known by the company ...
and American Stock Exchange
NYSE American, formerly known as the American Stock Exchange (AMEX), and more recently as NYSE MKT, is an American stock exchange situated in New York City. AMEX was previously a mutual organization, owned by its members. Until 1953, it was know ...
requests for review must be received "within thirty (30) minutes of execution time".
At the NYSE-Euronext Liffe (Paris, Brussels, Amsterdam), "Where a member has executed an Erroneous trade, he will have a maximum of 30 minutes from the time of execution within which he may contact Market Services to request an invalidation".
At the London Stock Exchange
London Stock Exchange (LSE) is a stock exchange in the City of London, England, United Kingdom. , the total market value of all companies trading on LSE was £3.9 trillion. Its current premises are situated in Paternoster Square close to St P ...
"any requests from member firms to cancel trades should be made to the Market Supervision department as soon as possible and in any event within 30 minutes of the trade time".
At the Singapore Exchange
The Singapore Exchange Limited (SGX) is a Singaporean investment holding company that provides different services related to securities and derivatives trading and others. SGX is also a member of the World Federation of Exchanges and the Asian ...
, "the matter must be referred to SGX-ST within sixty (60) minutes from the time the error trade occurred".
The Frankfurt Stock Exchange
The Frankfurt Stock Exchange (german: link=no, Börse Frankfurt, former German name – FWB) is the world's 12th largest stock exchange by market capitalization. It has operations from 8:00 am to 10:00 pm ( German time).
Organisation
Loca ...
in Germany applies the following rules: in case of transactions in securities traded in Continuous Auction, the Mistrade application shall be submitted within two trading hours upon receipt of the execution confirmation pursuant to § 2 Paragraph 1 Clause 2. As far as transactions of securities other than structured products, which are traded in Continuous Auction, are concerned, the application term ends according to Clause 1 upon closing of trading hours for that day, so the mistrade application has to be submitted "within half an hour after the closing of trading hours" at the latest.
Exclusion of rescission rights
In order to have legal certainty Legal certainty is a principle in national and international law which holds that the law must provide those subject to it with the ability to regulate their conduct.
The legal system needs to permit those subject to the law to regulate their condu ...
and in order to avoid the situation that courts have to decide ex-post
References
Notes
References
Further reading
*
*
{{Latin phrases
Lists of Latin phrases, E ...
if a trade should be binding or not, erroneous trade rules of exchanges usually exclude civil-law rescission rights.
This explains why banks usually have to carry huge losses when clearly erroneous trades occurred that have not been detected within 30 minutes.
Examples
Fat-finger errors are a regular occurrence in the financial markets:
* In 2001, UBS sold 610,000 Dentsu
Dentsu Inc. ( ja, 株式会社電通 ''Kabushiki-gaisha Dentsū'' or 電通 ''Dentsū'' for short) is a Japanese international advertising and public relations joint stock company headquartered in Tokyo. Dentsu is currently the largest advertis ...
-shares at ¥6, instead of 6 Dentsu-shares at ¥610,000. Even though the error was spotted immediately, the Tokyo Stock Exchange
The , abbreviated as Tosho () or TSE/TYO, is a stock exchange located in Tokyo, Japan. It is the third largest stock exchange in the world by aggregate market capitalization of its listed companies, and the largest in Asia. It had 2,292 listed ...
did not cancel the trades and UBS had to buy back the shares at market-value which caused them a loss of US$100m.
* In 2006, a fat-finger error by a trader at Mizuho Securities in Japan caused the firm to short sell a stock in an error that cost the firm ¥40 billion to unwind.
* In 2014, a Japanese broker erroneously placed orders for more than US$600bn (£370bn) of stock in leading Japanese companies, including Nomura, Toyota Motors
is a Japanese multinational automotive manufacturer headquartered in Toyota City, Aichi, Japan. It was founded by Kiichiro Toyoda and incorporated on . Toyota is one of the largest automobile manufacturers in the world, producing about 10 ...
, and Honda
is a Japanese public multinational conglomerate manufacturer of automobiles, motorcycles, and power equipment, headquartered in Minato, Tokyo, Japan.
Honda has been the world's largest motorcycle manufacturer since 1959, reaching a producti ...
, which were subsequently cancelled.
* In 2015, a junior employee at Deutsche Bank
Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...
whose superior was on vacation confused gross and net amounts while processing a trade, causing a payment to a US hedge fund of US$6bn, orders of magnitude higher than the correct amount. The bank reported the error to the British Financial Conduct Authority, the European Central Bank
The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centr ...
and the US Federal Reserve Bank
A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve ...
, and retrieved the money on the following day.
* In 2015, the Investor Armin S.
Armin S. (complete name unknown, born ) is a German independent Security (finance), securities trader. He achieved international recognition in 2017 when he filed a lawsuit against BNP Paribas for its continued refusal to deliver Euro, €163 mil ...
bought certificates from BNP Paribas at a price of €108 instead of €54,400 each. This caused a loss of €160m for BNP. The error was not detected because BNP failed to book more than 8000 trades for a whole week.
* In 2016, it was believed a fat-finger error caused the British pound to drop 6% in just a few minutes to US$1.1841, its lowest value for 31 years. A report by the Bank for International Settlements
The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".
The BIS carries out its work thr ...
later concluded that the drop was not caused by a single factor.
*On 8 April 2018, in the 2018 Samsung fat-finger error the company erroneously issued new shares to employees in a stock ownership plan. The error disrupted the Korean finance market.
* In 2018, Deutsche Bank
Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...
mistakenly transferred 28 billion euros to one of its outside accounts, more than the bank's market value.
See also
* Flash crash
*Typographical error
A typographical error (often shortened to typo), also called a misprint, is a mistake (such as a spelling mistake) made in the typing of printed (or electronic) material. Historically, this referred to mistakes in manual type-setting (typography) ...
References
{{Wiktionary, fat finger
Financial markets
User errors