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Computer Upgrades Fail 'First Metre' Test at Tokyo Stock Exchange (13 Dec 2005)

For 56 years the Tokyo Stock Exchange has traded without fail. In preparation for its planned market floatation its computer system was upgraded earlier in the year. Last month following completion of the improvements the TSE was closed down for the first time ever – by computer failure. Then earlier this month a young trainee dealer mis-entered data for a trade. The input was self-evidently in error (involving 40-times more shares than were issued) in what is called a ‘fat-finger’ incident – the keying-in of incorrect data. In this case 610,000 shares were sold for one yen, rather than the reverse. 

An automatic error messages generated by the software was ignored and efforts to cancel the rogue trade were unsuccessful because of related software problems. Apparently system error messages were sufficiently often displayed by the system that they were generally ignored by the more experienced traders. The process for rectifying such errors has apparently been inadequate according to a statement made by Sadao Yoshino, the managing director of the TSE. The brokerage firm, Mizuho Securities, lost £195 million following the trade. The Nikkei Index plunged 300 and confidence in the TSE fell to an all time low.

Japan's Finance Minister, Kaoru Yosano,  criticised the 'ugly' actions of other financial institutions in Japan, the US and Switzerland who profited from the incident. "Although I realise that their transactions were legal, it is not a beautiful story for securities firms to snap up stocks while being aware of an erroneous sell order" he observed. Observers in Tokyo have described the profiteering - mainly by UBS - as kajiba dorobo, a phrase which describes the despised thief who steals from burning houses. USB announced that it had no intention of retaining profits made on the day of the error. The president of the TSE together with the Exchange's MD and head of IT, Yasuo Tobiyama, all resigned from their posts a few days after the incident.