[FWD: Trader's error causes multi million-dollar loss]

[Rodent of Unusual Size]

You folks like stock twiddling so much.. :-)

-------- Original Message --------
Subject: FWD: Trader's error causes multi million-dollar loss
Date: Sun, 09 Dec 2001 07:13:55 -0500
From: "Donald E. Eastlake 3rd" <dee3@torque.pothole.com>
To: interest@another.pothole.com


Message-Id:  <5.1.0.14.2.20011207195112.030ee250@127.0.0.1>
Date:  Fri, 07 Dec 2001 19:51:27 -0500
From:  David Farber <dave@farber.net>
Subject:  IP: Trader's error causes multi million-dollar loss: [risks] Risks
	   Digest 21.81

>Date: Tue, 04 Dec 2001 08:19:18 -0800
>From: "George C. Kaplan" <gckaplan@ack.berkeley.edu>
>Subject: Trader's error causes multi million-dollar loss
>
>An article in the *Wall Street Journal* on 3 Dec 2001 describes how a simple
>data-entry error could end up costing UBS Warburg up to $100 million:
>
>   Dentsu Inc., one of the world's biggest advertising companies, was making
>   its trading debut Friday on the Tokyo Stock Exchange after completing one
>   of the year's biggest initial public offerings -- a deal arranged by UBS
>   Warburg, a unit of Switzerland's UBS AG, ...
>
>   Before the Tokyo market opened Friday, a UBS Warburg trader entered what
>   was intended to be an order to sell 16 Dentsu shares at 610,000 yen
>   ($4,924.53) each or above.  Instead, the trader keyed in an order to sell
>   610,000 Dentsu shares at 16 yen apiece ...
>
>The order was canceled by 9:02 AM, but not before 64,915 shares, almost half
>of the 135,000 shares in the IPO, had been sold.  The price of Dentsu
>shares, which had been bid up to 600,00 yen before the market opened, fell
>to 405,000 yen.  Now, UBS Warburg is obligated to deliver the shares it
>sold, and will have to buy them on the open market.
>
>The article doesn't say anything about sanity checks in UBS's trading
>software.  These have their own risks, of course, but you'd think that an
>error of 4 orders of magnitude in the selling price would at least merit an
>"Are you sure?" before the order went through.
>
>Once again, we see how computers let people make really big mistakes quickly.
>
>George C. Kaplan. Communication & Network Services, University of California
>   at Berkeley  1-510-643-0496  gckaplan@ack.berkeley.edu

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