JAPAN: Tokyo stock exchange accepts responsability for a malfunction in their trading system that cost a Japanese bank 27 billion yen in losses

Record ID: 468168

  • Title: JAPAN: Tokyo stock exchange accepts responsability for a malfunction in their trading system that cost a Japanese bank 27 billion yen in losses
  • Date: 12th December 2005
  • Summary: TOKYO, JAPAN (FILE) (REUTERS) VARIOUS OF EXTERIOR/INTERIOR OF TOKYO STOCK EXCHANGE EARLIER LAST MONTH WHEN THE SYSTEM CRASHED (4 SHOTS)
  • Embargoed: 27th December 2005 12:00
  • Keywords:
  • Location: Japan
  • Country: Japan
  • Topics: Finance
  • Reuters ID: LVACGIYNF9X2RZOU55X1D2W3T577
  • Story Text: The Tokyo Stock Exchange said on Sunday (December 11) its own system was at fault in obstructing an attempt by Mizuho Securities to cancel a massive erroneous sell order last week, contributing to market turbulence.
    "We have found that a malfunction of our own trading system was the cause preventing Mizuho Securities from cancelling the sell order," the bourse said in a statement.
    Mizuho Securities tried to withdraw the sell order for shares in staffing firm J-Com Co. shortly after noticing its mistake, but the TSE system was processing existing orders at the time and could not cancel the order, the bourse said, citing the latest findings by Fujitsu Ltd., which developed the exchange's stock trading system.
    Fujitsu was not immediately available for comment.
    The TSE had previously said that Mizuho Securities made an incorrect input to cancel the order, forcing the securities firm to apologise in the press conference on Friday.

    "Our losses are expected to amount to about 27 billion yen (225 million U.S. dollars) and could rise further than that," Mizuho Securities president Makoto Fukuda said.
    TSE President Takuo Tsurushima said he intends to take responsibility and resign over this latest fiasco.
    Meanwhile, the watchdog Financial Services Agency has asked the TSE to report on details of its system problems, a senior official at the agency told Reuters.
    Mizuho Securities, the brokerage unit of Mizuho Financial Group, admitted the problem on Thursday, saying one of its traders entered what was intended to be an order to sell one share of J-Com -- a staffing firm that made its market debut on Thursday morning -- for 610,000 yen ($5,065).
    Instead, 610,000 shares, valued at $3.1 billion at J-Com's IPO price, were offered for 1 yen each, costing the firm at least 27 billion yen.
    The TSE, which suspended trading of J-Com Co. shares on Friday, declined to say if trading in them would resume on Monday.
    No buyer was actually able to pick up the phantom shares for 1 yen due to market rules designed to limit price fluctuations. But the shares may have gone as cheaply as 572,000 yen each, a discount of more than 9 percent to the intended sale price.
    One of many winners in the affair may be U.S. investment bank Morgan Stanley, which bought about 4,500 J-Com shares on Thursday.

    However the problem comes less than six weeks after a computer systems failure caused a halt in trading at the TSE, the worst disruption ever for Asia's biggest bourse.
    Market analysts say while it doesn't help market confidence, the Tokyo bourse was lucky to have these problem happen when it did.

    "Well clearly it does nothing for market confidence, the incidence that have happened in the past and the fact that the recent two most incidents have happened in such close proximity to each other, are sort of putting the spotlight on the fact that there probably needs to be some systems upgrade sooner or later at the TSE," said Kirby Daley, Vice President of Societe General Securities.

    "However the nature of the problem and the scale of the problems themselves are not proving to be erroneous to investors from the stand point of long-term viability of the market place, of course with the economy and the market place as strong as it is, I think that it is quite lucky, the timing that these events happened. I think that in probably weaker market conditions the result might have be more disastrous," he added.
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