A ‘fat finger’ keyboard error has undermined the FTSE100 and lost around £400,000 in less than 30 seconds.
The unnamed but extremely embarrassed trader hit the wrong key and triggered a 10% rise in the shares of HSBC Bank.
The error added around £120 billion to the bank’s value and tripped an emergency alarm that suspended HSBC shares from trading to protect the company and the market from further losses.
After a five-minute investigation in which the trader admitted his inability on the keyboard, the HSBC share price was reset and trading continued as normal.
The London Stock Exchange moved the FTSE up several points for a few minutes, but a spokesman explained no trades were cancelled and the fail-safe built in to the exchange’s computer systems worked according to plan.
Circuit breaker kicks in
Although this means some traders could have profited from the mistake, other traders could be nursing heavy losses.
Traders say the error could have resulted from one of a number of actions – or a mix of several:
- The wrong number of shares for a trade was logged into the system
- The trade was not spread over enough time for the market to absorb the trade without spiking
- The trader failed to put an upper price limit on the transaction
To smooth pricing for trades, the stock exchange computer system has an algorithm that splits larges share transactions into several smaller trades over several minutes. If the algorithm is bypassed or fails to work, the market can show an unexpected rise or fall adding or wiping out company capital values.
Fail safe worked as planned
“All sorts of problems can arise that can affect the price of shares and the way the market works,” said the LSE spokesman. “That’s why the system has circuit-breakers to protect companies and traders that could lose millions of pounds in seconds if something goes wrong.
“In this case, everything worked as it should have and although there was a blip in the market that stopped HSBC trading for a few minutes, the financial consequences for the trader and the company could have been much worse if the circuit breaker wasn’t there.”
The error pushed the HSBC share price up from 629.3 pence to 688 pence within seconds. The trader had input an order for 18,050 shares at around the lower price before the alert suspended HSBC from trading.
In those few second, about 1.9 million HSBC shares were traded which, says the stock exchange, could have cost the trader around £400,000 for his or her mistake.