TOKYO - The trader was supposed to sell
one share for 610,000 yen ($5,065). Instead,
610,000 shares valued at $3.1 billion were offered
for 1 yen each.
Oops!
Somebody
made a typing mistake, said the brokerage unit of
Mizuho Financial Group, Japan's second-largest
bank. The error
set off
a frenzy of trades, and cost the unit at least 27
billion yen ($224 million) as it tried to buy back
the shares, the bank said.
"We deeply
apologize to investors, the issuer and other
people for having caused such a huge problem,"
Makoto Fukuda, Mizuho Securities' president, said
at a press conference in Tokyo. "It should never
have happened, but someone unintentionally ignored
the alerts."
"It's a funny story,"
Fumiyuki Nakanishi, a stock market strategist at
SMBC Friend Securities Co in Tokyo, said in a
phone interview on Friday. "Japan has become the
laughing stock of the world. Many markets are
concerned about this low standard of control
function of the stock order system. It's a very
nonsense story. A huge amount of money. Huge. Just
one order."
The erroneous sell orders in
J-Com stock made it the most actively traded by
value on the market on Thursday. The Osaka-based
staffing company, which sold 2,800 shares in its
initial public offering (IPO) earlier this month,
suddenly had 700,000 shares changing hands on its
stock market debut.
The brokerage realized
its mistake within three minutes, Fukuda said. But
four attempts to cancel the order failed. Even
Mizuho's head office couldn't stop it. So Mizuho
decided to buy back most, but not all, of the
shares.
Within those three minutes, shares
of J-Com fell by the 15% limit, from its IPO price
of 610,000 yen to 572,000 yen. Over the next eight
minutes, 607,957 shares were traded, including an
order for about 467,000 shares, according to
Bloomberg data. That trade alone was valued at
$2.2 billion. Then J-Com stock closed at 772,000
yen, up by the maximum permitted 15%. J-Com shares
were suspended from trading on Friday.
Because of market rules limiting price
fluctuations, the shares could not be bought for 1
yen but may have been sold as cheaply as 572,000
yen each.
The big question is, who gained?
Nakanishi speculates that somebody - perhaps day
traders - made massive profits. He said there was
a spike in chatter on Japanese-language chat
boards, with people posting messages such as
"maybe we can make a lot of money on this
accident".
"It's legal, it's a free
market," said Nakanishi. "It's difficult to know
who bought this. Maybe they got a huge capital
gain and then sold to institutional investors."
The losses at Mizuho, however, could
result in sackings, reduced salaries and a
government inquiry, he suggested. Mizuho shares
initially fell as far as 1.4%, while its rivals
Mitsubishi UFJ grew by 2.5% and Sumitomo Mitsui
Financial Group jumped 3.4%.
This wasn't
the first error on the Tokyo Stock Exchange (TSE).
On November 30, 2001, UBS AG sold 610,000 shares
in advertising firm Dentsu Inc for 16 yen apiece
on the company's debut, instead of the price of
420,000 yen in the IPO.
Nakanishi said
Thursday's "accident" highlighted the need to
overhaul the structure and technology of Japan's
trading system. "It's just Tokyo's problem. New
York doesn't have this. Of course they have to
change the system and structure, maybe the process
of the order system," he said.
"If the TSE
could diffuse this silly order, then the accident
would not occur. Maybe the system's programmer
didn't know how to arrange an order of equity.
Maybe they don't have knowledge of equity
markets."
He said these mistakes didn't
occur during Japan's stock market bubble in the
late 1980s, when foreign analysts and writers
mythologized the management, technology wizardry
and perfectionism of Japan Inc.
Those days
are long gone.
Making fun of the blunders
of Japan Inc has become a favorite pastime for
many of Tokyo's 400,000 foreigners, as well as
Japanese. The city's popular Metropolis magazine
leads with a tongue-in-cheek column, devoted to
the silly news of the week, called "This Week's
Required Reading by Rick Kennedy".
Japan's
financial sector has offered a lot of fodder
lately. Last month, a computer system glitch
delayed the start of equity trading on the TSE.
"The Tokyo Stock Exchange seized up for three
hours," said the column in the November 25 issue,
"and there was no way people could trade stocks,
except to stand in corners and give hot tips out
of the sides of their mouths."
Like
Metropolis, Japanzine's December issue also takes
aim at the money men. "If a Japanese bank ran
Christmas ... Each time a child sat on Santa's
knee and told him what they wanted for Christmas,
it would incur a charge of 110 yen (unless they
visited on the weekend, in which case it would be
210 yen)."
Nakanishi concedes that
Japanese don't like being made fun of, especially
by foreigners. Japanese call it baka ni
suru - making me stupid. They don't like being
stupid, especially after studying and working so
hard. For them, being the butt of jokes carries
the stigma of being bullied in school, a major
factor in the country's high suicide rate.
They don't like being nakama hazure
- a black sheep outside the group. And they don't
take criticism well. Their samurai ancestors would
disembowel themselves before someone could say
"shame on you".
But even Nakanishi says
the Tokyo market has become "the laughing stock"
of the world. Fortunately, investors are less than
1% of the population, he says. "This is a baka
ni suru of the stock market. But most Japanese
won't even know about it."
He predicted
that the Nikkei average, which has grown from
11,500 in January to over 15,000 this month, will
likely rise to 20,000 by the end of next year.
"The base economic condition is still very strong
for next year," said Nakanishi. "Japanese stock
price levels are still cheap compared with the New
York Dow or other average prices."
Especially when the price for a 610,000
yen stock is only a yen.
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