Finance

Barclays’ flash-crash and the top five ‘fat-finger’ trades

Barclays’ shares crashed 10% at the opening of the London Stock Exchange on 14 April after a suspected so-called fat-finger trade.

The flash-crash wiped as much as £3bn from Barclays’ market capitalisation, with shares plunging to 168p before rebounding to 186p, near its previous closing price.

While the error regarding Barclays’ shares was resolved reasonably quickly, other share trading errors have been more costly.

READ Barclays stocks suffer mini flash crash

1. Citi’s $900m payment error

Citigroup went to court last year in an unsuccessful attempt to try and persuade some of the recipients of an accidental $900m payment to return the money.

The bank transferred $900m to lenders to beauty company Revlon, paying off the full principal and accrued interest on a 2016 loan which the lenders had taken Revlon to court to try and get returned.

Citi then asked for the money back, saying it had been transferred in an “operational error”.

Some lenders returned roughly $385m to Citi, while others refused to return the cash, with Citi then taking them to court to demand repayment.

The judge presiding over the case branded Citi’s mistake as “one of the biggest blunders in banking history,” however, he came down on the side of the lenders, ruling that the lenders were justified in believing that the payments were legitimate.

Citi had argued that the lenders knew they had received the money in error, unearthing chat messages mocking the bank for the payment.

READ Citigroup feuds with hedge funds over botched $900m payment

“‘How was work today honey?’” an unnamed employee at hedge fund HPS wrote in an internal message. “‘It was ok, except I accidentally sent [$900m] out to people who weren’t supposed to have it,’” they wrote, mimicking a conversation with the banker responsible for the mistake.

2. Deutsche Bank’s $6bn forex kerfuffle

The German bank accidentally transferred $6bn to a hedge fund client in 2015 after a junior trader on its foreign exchange desk mistakenly put through the trade.

The FT reported that a junior member of the bank’s forex sales team executed the trade while his manager was on holiday.

The report said the trader processed a gross figure rather than a net figure meaning the trade had “too many zeroes”.

The hedge fund returned the cash the next day, sparing the junior trader’s blushes.

3. Mizuho’s trading debacle

A trader at Japanese bank Mizuho in 2005 cost the bank millions of dollars after rival banks and brokerages took advantage of a botched trade to pick up shares on the cheap.

The brokerage arm of Mizuho accidentally offered to sell 610,000 shares of recruitment company J-Com at one yen, instead of the intended one share at 610,000 yen.

Mizuho was forced to pay 912,000 yen a share to investors who bought shares of J-Com, suffering a loss of $335m, as part of an emergency settlement plan.

UBS, Morgan Stanley and Lehman Brothers were among the institutions to benefit from the settlement, The WSJ reported.

READ The fat finger points to trouble for traders

Japan’s financial services minister slammed rival bank’s for profiting at Mizuho’s expense, but said that no rules or regulations had been broken.

“It’s not a pretty story when other brokerage firms place orders for their own accounts, knowing that it was a mistaken order,” Kaoru Yosano said.

4. UBS trader buys and sells £80bn of stock in two minutes

A UBS equity specialist bought and sold nearly CHF190bn (£80bn) of stock in Swiss pharma company Roche in two minutes in 1999. The company’s market capitalisation was only CHF130bn.

The equities trader entered a sell order for 10 million shares on the Swiss exchange, despite there being only seven million shares in issue.

The order was live on the order book for nearly two minutes before the trader realised his mistake when he entered a buy order to execute the trade.

The commission on the trade would have been worth £160m.

5. Bank of America’s blunder

Bank of America blamed a rogue rugby ball on the trading floor for a mistaken $50m trade in 2006. A trader’s keyboard was set up to execute an order when a senior trader gave the signal, with the trader only having to press enter on their keyboard for the trade to go through.

However, a rugby ball tossed across the trading floor landed on his desk and executed the $50m trade ahead of schedule. The ball-chucker, a graduate trainee, was reprimanded, but no other action was taken.

Another trader said: “Rugby balls are a regular danger on any trading floor so the victim trader ought to have hedged against this possibility.”

To contact the author of this story with feedback or news, email James Booth

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