Sell 1 Share... or 610,000
01:18 · Point of failure
On 8 December 2005 a Mizuho Securities order to sell one J-Com share at 610,000 yen went out inverted, as 610,000 shares at 1 yen. The desk tried to cancel within seconds, and a defect in the Tokyo Stock Exchange's own system would not let the cancellation through.
Editions
- Watch
- The episode on YouTube1:42
- Read
- Sell One Share for 610,000 Yen. He Typed 610,000 Shares for 1 Yen.technical debrief · zof.ai
Incident
- System
- Mizuho Securities' order entry for the J-Com listing and the Tokyo Stock Exchange trading system that received it
- Date
- 8 December 2005
- Location
- Tokyo, Japan
- Toll
- A loss to Mizuho Securities of about 40.7 billion yen, roughly $340 million at the time. No physical harm.
- Topics
- trading · order entry · alert fatigue · cancellation · banking
Point of failure
The cancellation path did not work under the conditions the erroneous order created, so the one control that turns a keying mistake back into a non event was unavailable at the moment it was needed.
Transcript
Two numbers
A trader meant to sell one share for six hundred ten thousand yen. He sold six hundred ten thousand shares for one yen each.
This is The Point of Failure, episode eight.
The swap
Tokyo, 2005. A company called J-Com goes public. At Mizuho Securities, a trader types the sell order.
Two fields sit side by side: quantity, and price. He swaps them.
Six hundred ten thousand shares at one yen.
That is not just a bad trade. It is more shares than the entire company has in existence.
The system shows a warning, but traders see warnings all day long, on normal orders too. Click. Overridden. Sent.
The cancel that did not work
Seconds later, the desk realizes. Cancel. Cancel. Cancel.
And here is the twist that makes this legendary. The cancel does not work.
The Tokyo Stock Exchange's own system has a defect, and it will not let them stop the order.
They are watching the fire and the extinguisher is broken.
The damage: around three hundred forty million dollars.
And then, years later, the Japanese court does something remarkable.
What actually broke
Point of failure
It rules the exchange itself partially liable, because the trader made the mistake, but the system made it unstoppable.
Humans fat finger things every single day. Systems decide whether that becomes a typo, or a catastrophe.
Every failure has a story. Every story was preventable.
I'm Kevin. See you at the next one.
Sources
The exchange's own statement of 12 December 2005, and the primary record for the break: "Mizuho Sec. made several attempts to cancel the order, but as these cancel orders were made while executions were being processed, an irregularity occurred in which the target order was not canceled. This is an irregularity that arises when deemed processing is applied to an order, and a corresponding opposing order exists." The original page is no longer served, so it is cited from the capture.
Share trade of J-COM Co., Ltd.
Mizuho's own statement on the day, 8 December 2005, describing "the input mistake by placing order on shares of J-COM Co., Ltd.(code number: 2462) this morning". It fixes the date, the company and the nature of the error from the firm that made it.
Consolidated Financial Information for the Third Quarter of Fiscal 2005
The audited figure behind the number the episode states, released 31 January 2006: "A loss of ¥40.7 billion resulting from the placement of the erroneous order by Mizuho Securities Co., Ltd. was booked as Extraordinary Losses." That is the roughly $340 million spoken in the episode, at the exchange rate of the time.
Filed with the Financial Services Agency on 20 January 2006, and the record for treating the overridden warning as a design failure rather than a character one. The remedies include "Adoption of rules regarding the authorization of deactivating warning alarms (when such alarms are triggered) upon confirmation of the warning details by someone other than the initial operator", "Revising of procedures to limit the deactivation of high-level warning alarms to qualified officers" and "Improvement in alarm indication such as enlarging alarm windows and setting the alarm sound": a warning one person could dismiss alone, and that did not stand out.
Notice regarding Conclusion of Litigation against Tokyo Stock Exchange, Inc.
The exchange group's own account of how the case ended, and the record for the ruling the episode describes. It sets out the claim of about 41.5 billion yen, the Tokyo District Court's order of 4 December 2009 that TSE pay about 10.7 billion yen in damages, the Tokyo High Court judgment of 24 July 2013, and the Supreme Court's refusal to take the case, which made that judgment final on 4 September 2015.
Botched stock trade costs Japan firm $225M
Contemporaneous reporting from 9 December 2005, and the record for the line about the order being larger than the company: Mizuho "tried to sell 610,000 shares at 1 yen (less than a penny) apiece of a job recruiting firm called J-Com Co., which was having its public debut on the exchange. It had actually intended to sell 1 share at 610,000 yen ($5,041)", and "the number of shares in Mizuho's order was 41 times the number of J-Com's outstanding shares". The $225 million in the headline is the estimate available that day; the loss Mizuho eventually booked was the ¥40.7 billion in its Third Quarter financial information above.
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