The Search Continues For Possible $16bn 'Fat Finger' Trader

Unhappy Trader

It's was simply the most dramatic few minutes in equities trading ever. Market professionals with decades of experienced were transfixed, as the Dow Jones Industrial Average fell almost 1000 points and recovered around 700 in just a matter of minutes during late afternoon trading Thursday.

Shares in Procter & Gamble appeared to fall from $60 to $39.37 and back up again in minutes. And the stock in other big US companies made equally dramatic moves. Accenture shares opened at $41.94, were recorded as falling as low as 1 cent, and then closed at $41.09. One trader told Here Is The City: 'These moves were just jaw-dropping. We were so transfixed by though, that we didn't even have time to panic. By the time most of us had realised what had occurred, the market had rebounded'.

Quite what happened still remains unclear. US market regulator The Securities and Exchange Commission has launched a probe into the matter, while The New York Stock Exchange has said that there appears to have been no systems error and points to what it describes as 'a number of erroneous trades' which caused the extreme volatility. The Nasdaq, which is also undertaking a review to attempt to find out what happened, has confirmed that trades in some 286 securities which rose or fell by more than 60% during those few minutes of trading have been cancelled.

The theories are plentiful - panic selling (unlikely, as it all happened so quickly), programmed trading that fed on itself (possible), a systems glitch (plausible despite the early denials of problems), or a 'fat finger' trader. And it's the 'fat finger' trader theory that so far has gained most traction. The New York Post is reporting market speculation that 'a trader at Citigroup, seeking to place an order for 16 million shares in a miniature exchange that mimics the performance of the Standard & Poor's 500 index, accidentally keyed in an order for 16 billion shares of the securities, known on Wall Street as 'E-minis''. Citi, however, has come out and said that it has found 'no evidence' that the firm was behind any of the so-called 'erroneous trades'.

The Dow opened at 10,868.12 Thursday, and fell to an intra-day low of 9,869.62, before recovering to end the day at 10,520.32 - down 347.80 points (3.2%).

Sources - Bloomberg, CNBC, Reuters, The Financial Times, The New York Times

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