“I almost fat fingered one!” is something I’ve heard a few times while standing beside a trading bullpen. A “Fat Finger Trade” refers to a trader accidentally hitting the wrong keys or hitting the right keys too many times when trying to place a trade on the market.
An example of a Fat Finger Trade
You want to buy 100 shares of Research in Motion at $75.00/share, but you accidentally enter in an order of 9100 shares at $75.00/share. One trade commits you to $7,500 of stock, the other commits you to $682,500. Whoops.
Fat Finger Trades Happen All The Time
There is no shortage of traders with stories of fat finger trades. Many have lost their jobs because of one fat fingered trade. Perhaps the most famous story of a Fat Finger Trade would be that of a trader in Japan who fat fingered a trade in a newly listed company. He meant to sell one solitary share of a company (J-COM) for 610,000 Yen. Instead he entered a trade to sell 610,000 shares for 1 Yen. What’s even more strange is that there were only 50,000 shares publicly listed in J-COM, but the exchange let the order process.
Fat Finger Trade Fallout
It is estimated that the loss incurred was about $225 million (USD). The Tokyo Stock Exchange was assigned 70% fault for allowing a trade that should not have occurred and the brokerage was assigned 30% fault for the fat fingered trade. The exchange was ordered to pay a big settlement to the brokerage and the head of the TSE resigned as a result of the embarrassment. It’s a good bet the actual trader wasn’t with the firm for long after that.