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Capital Markets

Japan: TSE sued over Mizuho keystroke blunder

Losses from trader error in December should have been reversible, securities house claims.

By Chris Wright

Softbank/Vodaphone

Japan is becoming familiar with some unexplored concepts recently. There’s been the audacious leveraged buyout (Softbank/Vodafone); the blue-chip hostile takeover bid (Oji Paper/Hokuetsu); the Japanese company making transformational acquisitions overseas (Toshiba/ Westinghouse). And now the Tokyo Stock Exchange is about to discover something equally uncharted: being sued.

In December 2005, a trader at Mizuho Securities made a big mistake. Wishing to sell one share in cable TV and telecoms business J-Com for ¥610,000, he accidentally entered a sale of 610,000 shares at ¥1 – more than the outstanding stock of the entire company. Realizing his mistake within minutes, the trader tried to cancel the order, only to find himself unable to do so, thanks to a glitch in the Tokyo Stock Exchange’s software.

Demand for recompense

Mizuho, which ended up having to pay ¥912,000 ($7,800) per share to unwind its unintended short position, found itself out of pocket to the tune of more than ¥40 billion. Now it wants the money back.

After months of apparently fruitless discussions between the two sides, in August Mizuho sent a note to the Tokyo bourse demanding damages in full. The TSE – which would lose two years of net profit were it to pay up – appears unlikely to agree.

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