Fat Finger TradesThe 5 Worst Fat-Finger Trades in History. Photo: Travis Wise (Flickr) https://creativecommons.org/licenses/by/2.0/

The 5 Worst Fat-Finger Trades in History

From ancient times up to the present day, traders everywhere have been making terrible mistakes that have cost them - or others - a lot of money.

They call them "fat finger" trades, and here we run through five of the worst, including losing it all for a bowl of soup and why you should never drink and trade...

1. Esau trades away his birthright

Bad financial decisions made under pressure have not been confined to the era of electronic trading. In the Book of Genesis, the Bible relates how Esau, the eldest son of Old Testament patriarch Isaac, traded away the material and spiritual inheritance he was entitled to as his father’s firstborn. After a hard day’s work in the fields, Esau surrendered these rights to his brother Jacob in return for… a bowl of lentil soup. Let’s hope it was a tasty dinner.

Jacob went on to seal the deal by tricking Isaac into thinking that he was Esau when his father was ready to bestow his blessing on Esau before his death. Using animal skin, Jacob pretended to be his much hairier older brother, which fooled his nearly-blind father. Despite the losses Esau suffered, he and Jacob were eventually reconciled.

Cost: incalculable

2. Don’t drink and trade

Fast-forward a few years to 2010, when in the spring fat-finger trades were initially blamed for May’s flash crash, which saw trillions of dollars wiped off stock markets globally. These assumptions were later proved to be wrong, but later in the year losses came to light that were unquestionably due to trader error.

After a corporate golf day and a few too many drinks, oil trader Steve Perkins decided to place some trades from his laptop at home. Over the course of the next 24 hours, he ordered seven million barrels of crude oil for around £345 million, representing around 69 per cent of global trading in oil at that point – and saddled his employer with a rather large bill. Perkins was banned from trading for five years by the FSA and enrolled on an alcohol rehabilitation programme.

Cost: £7.3 million and one trading career

3. Going large in Japan

The year 2014 saw what could have been one of most expensive fat-finger trades ever. In October a series of accidental orders for shares in some of Asia’s largest corporations, including carmaker Honda and bank group Nomura, hit the country’s stock market one night, representing hundreds of billions of dollars of business. Orders included a request for 1.9 billion shares in Toyota, around 57 per cent of its total share capital.

Luckily for all concerned, the requested trades – made by a single misguided Japanese trader – could be cancelled so were never actually fulfilled. If they had been, the trader’s employer would have faced a bill around the size of the economy of Switzerland. But the mistake must have had a significant cost in terms of embarrassment for those involved.

Cost: $711 billion – though trades were never executed

4. A very good payday

This year saw another huge trading mistake made in Asia. An employee at South Korea’s Samsung Securities mistakenly allocated 2.8 billion shares to the company’s other employees instead of giving them a dividend of 2.8 billion won as intended. This was more than 30 times the number of shares Samsung actually had available, but this did not stop some members of staff from promptly cashing in their windfall of “ghost” shares, making around 10 million won each.

The mistake led to an investigation into Samsung Securities and into trading in South Korea as a whole. The company’s value plunged by more than 10 per cent, it was publicly criticised by South Korea’s national pension fund, an important client, and it saw the scandal become the subject of a petition to South Korea’s president.

Cost: Could have been as much as $100 billion, but only some shares were sold

5. An accidental profit

It’s very rare that a fat-finger mistake ends up working in a trader’s favour. But this is precisely what appears to have happened recently. French newbie day trader Harouna Traoré managed - though he incurred a €1 million loss first - to build up a $10 million profit from trading European and US equity futures with an account he didn’t realise was live.

However, the story doesn’t necessarily lead to a happy ending for Traoré. The trading platform he was using – that of UK firm Valbury Capital – declared that he was in breach of contract, that the trades creating the profit were therefore void, and that his trades would be cancelled. Traoré is now suing Valbury for what he claims are profits rightfully belonging to him.

Cost: $10 million, unless Traoré manages to win his case

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