The Tokyo Stock Exchange faced calls today for tighter controls after a botched trade saddled a securities firm with a loss of over $224m and briefly wreaked havoc on Asia's biggest bourse.
Mizuho Securities said an error by one of its dealers meant it accidentally tried on Thursday to sell 600,000 shares in J-Com, more than 41 times the number of the Osaka-based telecom outsourcing firm's outstanding stock.
Mizuho Securities President Makoto Fukuda said that the blunder would cost the firm 'at least' 27 billion yen ($224m) and some reports suggested it could be substantially more.
The brokerage arm of Mizuho bank 'put in sell orders for 610,000 shares at one yen instead of one share at 610,000 yen,' Fukuda said after a day of chaos. For others in the market, the error was a chance to make a quick profit.
The turmoil is also yet another embarrassment for the Tokyo Stock Exchange, which last month was forced to suspend trading in all shares for the first time ever after its computer system crashed. Although the latest problem was apparently the result of human error, many observers questioned whether the exchange's controls are adequate.
'We must take action to prevent another mistake,' Prime Minister Junichiro Koizumi said.
Japanese media said the rising popularity of online trading exacerbated the losses for Mizuho as news of the blunder quickly spread over the Internet. One investor wrote on a bulletin board: 'Do all you can to buy J-Com! I'm having fun!' Another said: 'I racked up five million yen in an instant but I feel as if I was doing something wrong.'
Risk evaluator Standard and Poor's said its credit ratings on banks in the Mizuho Financial Group would not be affected by the erroneous sell order. 'Although the loss is likely to increase as the brokerage completes share buy backs, Standard and Poor's believes it will not impact on the credit quality of the Mizuho group banks, given the group's overall health.'
It said a 27 billion yen loss would have a big impact on Mizuho Securities' net profit, which totalled 19.5 billion yen in the fiscal first half, but that the firm would probably receive support from the Mizuho group.
J-com saw its opening price of 672,000 yen fall within minutes of opening on Thurday to its limit low of 572,000 yen, before rallying up to the limit close of 772,000 yen, apparently as Mizuho tried to reverse its mistake.
Chaos ensued as the market tried to figure out what happened, bringing down shares in the brokerage sector. The benchmark Nikkei-225 index tumbled 1.95% in Thursday's trade, largely on profit-taking after recent gains.
But calm returned to the market today, when the Nikkei-225 gained 1.45% to close at 15,404. The Tokyo Stock Exchange suspended trading in J-Com shares today to prevent further chaos.
