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Sat, Dec 10, 2005 - Page 12 News List

Tokyo markets reel after US$224m blunder

HAVOC The Japanese prime minister called for tighter controls after a dealer caused a day of chaos by trying to sell 610,000 shares at ¥1 instead of one share at ¥610,000

AFP , TOKYO

The Tokyo Stock Exchange faced calls for tighter controls yesterday after a botched trade saddled a securities firm with a loss of more than US$224 million 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.

"We must take action to prevent another mistake. I want people to think of measures not to repeat the same kind of mistake," Japanese Prime Minister Junichiro Koizumi said yesterday.

Mizuho Securities president Makoto Fukuda told reporters that the blunder would cost the firm "at least" ¥27 billion (US$224 billion) and some reports suggested it could be substantially more.

The brokerage arm of Mizuho bank "put in sell orders for 610,000 shares at ¥1 instead of one share at ¥610,000," Fukuda told a midnight news conference on Thursday after a day of chaos.

For others in the market, the error was a chance to make a quick profit.

"Everyone in the market instantly knew the order was a mistake so some clever guys predicted that Mizuho Securities would have to put in a massive buy order later," said Hideo Mizutani, chief market analyst at Sieg Securities.

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.

"I think the accident is a good opportunity to overhaul the rules in stock markets in Japan as this kind of mistake could happen again in the future. For example, it is worth considering rules on shares which show unusually big price fluctuations, or rules on a deal that obviously was made by mistake," Mizutani 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 ¥5 million in an instant but I feel as if I was doing something wrong."

J-Com saw its opening price of ¥672,000 fall within minutes of opening on Thursday to its limit low of ¥572,000, before rallying up to the limit close of ¥772,000, 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 percent in Thursday's trade, largely on profit-taking after recent gains.

Shares of Mizuho Financial, whose group includes Mizuho Securities, tumbled ¥31,000 or 3.4 percent to ¥890,000 on Thursday.

But calm returned to the market yesterday, when the NIKKEI-225 gained 220.69 points or 1.45 percent to close at 15,404.05. The Tokyo Stock Exchange suspended trading in J-Com shares yesterday to prevent further chaos.

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