Fat finger error spooks London markets

Fat finger error spooks London markets

Circuit breakers on the London Stock Exchange kicked into action yesterday, halting trading in five stocks after a suspected 'fat finger' error led to a sudden dip in prices.

The London market operator moved to suspend trading in BT, Hays, Next, Northumbrian Water and United Utilities after wild swings in their stock prices Tuesday afternoon.

The outbreak of volatility spooked the markets, leading to loose talk that a hedge fund had imploded. Trading resumed after the suspended shares were auctioned and none of the stocks closed more than 1.3 pence higher or lower at the end of play.

Market insiders blamed a fat finger error, either from human input or automated trading failure.

Giles Nelson, CTO of Progress Software - a supplier of pre-trade risk systems - blames failings in broker front office controls.

"While it's commendable that the exchange detected and suspended trading in these stocks when the erroneous trades occurred, it should never have reached the exchange in the first place," he says. "You have to ask the question, how on earth did they make it past the member's pre-trade risk system, if such a system was even in place or existed?"

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