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Japan Stunned After Biggest Ever, $617 Billion "Fat Finger" Trading Error Slams Stocks

A few days ago, Bloomberg had a fascinating profile of the person, pardon degenerate Pachinko gambler, who goes under the name CIS, and who is the "mystery man who moves the Japanese market." In a nutshell, CIS, a momentum day trader and living proof of survivorship bias in finance (because for every CIS who has, allegedly, made it some 999,999 have failed) has amassed a fortune that he says now exceeds 16 billion yen after having traded 1.7 trillion yen in his career, generating an after tax profit of 6 billion yen in 2013 alone. Of course, the numbers are likely wildly fabricated for pageview purposes becuase as Bloomberg itself admits, "CIS didn’t offer a complete accounting of his investing returns and his wealth for this story, and some of his claims can’t be verified."

That said, it is indeed the case that Japan has increasingly become a cartoon market in which while days can go by without a single trade taking place in its rigged bond market, where the BOJ has soaked up all the liquidity, when it comes to equities, it has become a free for all for "Mr. Watanabes" who have never taken finance, accounting or economics, but who know all about heatmaps and chasing momentum, and as a result, in a rising market/tide environment, have all grown ridiculously rich.

The problem, of course, is that what some may call a market is anything but, and has become a fragile playground for a few technicians who move massive sums of money from Point A to Point B, hoping to outsmart the few remaining others, while in the process earning the rents that the BOJ is eagerly handing out by injecting liquidity at a pace that dwarfs what the Fed did for the past 2 years. The other problem is that it is a merely of time before everything crashes into a pile of smoldering rubble thanks to the unprecedented fragility that is now embedded in every market, although most likely in Japan first.

Which leads us to what just happened in Japan when as Bloomberg reports, stock orders amounting to a whopping $617 billion (yes Bilion with a B) or more than the size of Sweden’s economy, were canceled in Japan earlier today, for reasons unknown although the early culprit is that this was one of the biggest trading errors of all time.

Of course, since this trade was noted, and DKed, one can assume that a major whale was on the losing end of the trade: recall that this is precisely what happened to Goldman time and again, when some errant algo caused the firm to lose millions on several occasions in 2012 and 2013.

There is one tiny difference: this time it was not Goldman, and the total amount was not a few paltry million but over half a trillion dollars!

From Bloomberg:

At 9:25 a.m. Tokyo time, orders for shares in 42 companies totaling 67.78 trillion yen ($617 billion) were canceled, according to data compiled by Bloomberg from the Japan Securities Dealers Association. A representative at the organization wasn’t immediately available to comment.

 

The biggest order was for 1.96 billion shares of Toyota Motor Corp., or 57 percent of outstanding shares at the world’s biggest carmaker, for 12.68 trillion yen through an off-exchange transaction. Toyota declined to comment. Other stocks with scrapped transactions included Honda Motor Co. (7267), Canon Inc., Sony Corp. and Nomura Holdings Inc.

 

“Fat finger” trading mistakes occur periodically. In 2009, UBS AG mistakenly ordered 3 trillion yen of Capcom Co. convertible bonds. Still, today’s scrapped trades were of a different magnitude.

 

“I’ve never heard of orders this big being canceled before,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., which oversees about $474 billion in assets. “There must have been an error.”

 

While no harm’s been done because the orders were canceled, there should be an explanation to alleviate concerns, Sera said.

 

“It’s not rocket science that there was a fat finger here, but it reopens the question about accountability,” said Gavin Parry, managing director at Hong Kong-based brokerage Parry International Trading Ltd.

It may not be rocket science, but one wonders: just who has the potential to trade over half a trillion in market orders, let alone screw it up? Is it the Pachinko gambler... or the central bank itself screwing up its market orders? And just how much longer before such recurring incidents, whether in Japan or the US or Europe, force everyone to finally realize that the market is an HFT-rigged, central bank-manipulated and, now, completely broken casino.

Actually, judging by retail participation in the recent "bull market"...

... the answer is: it already has.