Ooooops

Ian Murray seamus2001 at home.com
Tue May 15 20:57:05 PDT 2001


[Is this what they mean by randomness in the EMH? :-)]

Slip of finger that cost City dearly

Jill Treanor, deputy city editor Wednesday May 16, 2001 The Guardian

An incidence of "fat finger syndrome" - inadvertently pressing the wrong button on a computer keyboard - landed an American investment bank with multimillion pound losses yesterday and is expected to cost the young City trader involved his job. Lehman Brothers, a big US firm based in the Square Mile, is having to provide an urgent explanation to the stock exchange and the financial services authority, the city watchdog, who want to know the reason for a mistake that caused a 120 point fall on the FTSE 100 index on Monday afternoon, temporarily wiping almost £40bn from the value of Britain's top companies.

The bank was in the process of completing a complicated share trade, which involved the simultaneous computerised sale of almost all the shares in the Top 100 index.

According to City sources, the trader inadvertently entered details to sell shares in leading companies such as oil company BP and pharmaceuticals group Astra Zeneca which were 100 times bigger than he had intended.

The deal amounted to £300m rather than £3m and flashed across stock market screens just as the stock market was about to close, causing a precipitous fall on the Footsie, the barometer of British corporate health.

While computer keyboard errors have affected the market before, they have not had the extreme consequences of Monday when the FTSE 100 index will forever register a close some 200 points lower than had been expected.

It closed at 5,690 on Monday but yesterday had recoved to 5,892 as share prices corrected themselves. Lehman Brothers was said to be nursing losses of between £5m and £10m, having been forced to buy back shares it had not intended to sell.

The exact scale of the losses is difficult to quantify because they increased as the stock market rose yesterday.

One City source said the error occurred when a trader had tried to input a fraction - expressed as a decimal - such as 0.5, but had input 50 instead.

Lehman Brothers refused to comment but other investment banks confirmed that an error on its trading desk late on Monday had been the cause for the stock market decline.

The US bank faces a hefty fine from the stock exchange if its investigation concludes that it failed to have systems in place to prevent an erroneous deal being executed. The FSA has the powers to censor individuals involved. Even if the loss was caused by a genuine mistake, City regulators want to establish why Lehman's internal computer systems did not ring alarm bells and prevent the trade taking place.

One source described it as a case of "fat fingers" - pressing too many keys. The stock exchange said: "We are talking to the member firm concerned and treating it as human error. We want to know how the error slipped through the net."

The FSA said it was monitoring the situation but neither it nor the stock exchange would confirm the offending firm was Lehman Brothers.



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