Securities firms give up Mizuho windfalls

Securities firms give up Mizuho windfalls

Around 50 securities firms have agreed to hand over Y20bn in profits gained from exploiting the "fat finger" trading error made by a Mizuho Securities trader in December to a fund that will be used to improve the Tokyo Stock Exchange's (TSE) dealing platform.

Mizuho Securities reportedly lost around Y40bn in December after a trader mistakenly sold 600,000 shares at one yen apiece in recruiting company J-Com. The broker had actually intended to sell one share at Y610,000.

The TSE later admitted that a problem with its own dealing system prevented the Mizuho Securities trader from cancelling the erroneous share-sale order.

The Mizuho trade claimed the job of TSE president Takuo Tsurushima - who resigned alongside IT head Sadao Yoshino and managing director and executive officer Tomio Amano - following this incident and an earlier systems failure at the exchange.

Foreign companies including UBS, Morgan Stanley and Credit Suisse reportedly made the largest profits from the trade and were criticised by some Japanese government ministers for exploiting the mistake.

Now 50 foreign and Japanese investors have agreed to donate a combined Y20 bn to the Japan Securities Dealers Association (JSDA), which will use the money to set up a fund to improve the TSE's trading system.

But according to a Financial Times report, around 98 institutional and individual investors actually profited from the trade - which cost Mizuho Securities Y40bn - but only 50 have agreed to hand back profits. The report claims the missing Y19bn indicated that a large number of primarily Japanese investors refused to cave in to government pressure and kept the money.

In a similar "fat finger" trading error, Daiwa Securities is reportedly cutting the pay of four senior executives after a trader placed an order to sell 25,000 shares of Sumitomo Mitsui Financial Group, instead of an order to sell the same number of shares of a different company, and lost Y500 million.

The trader reportedly by-passed an alert message that popped up on the computer screen when placing the erroneous order last month. The alert popped up because the sell order put through was more than 1000 times the minimum trading unit for the stock of Sumitomo Mitsui Financial Group, but the trader ignored it.

According to press reports, the brokerage has cut the pay of four senior executives by 10% for one month, while six other employees received reprimands for the trading error. In addition Daiwa president Tatsuei Saito and deputy president Kenjiro Noda will voluntarily forgo 10% of their pay for a month.

Daiwa says it will upgrade its check system for stock order placement and tighten rules on warnings for large scale stock trading to prevent similar errors.

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