Top Firm Fined For $10.8bn 'Fat-Fingered' Trade

Reuters reports that The New York Stock Exchange (NYSE) has fined Morgan Stanley $300,000 over a fat-fingered trader who, in September 2004, entered an order to buy $10.8bn of stocks - when the buy order was actually for $10.8m.

According to the news agency, at 9.32am on September 1st, 2004, the trader entered an agency order on behalf of the firm for 100,000 units in a basket of stocks to cover a short position. But the system used to create the basket built in a multiplier of 1,000 - hence the error. NYSE says that around 677.4 million shares were transmitted for execution, and about 81.5m worth $875.3m were traded before the order was cancelled.

The botched trade is said to have caused a significant disruption of the market for at least 15 minutes. Morgan Stanley was found to have had inadequate controls in place to prevent the error occurring. The firm has agreed to pay up without admitting or denying wrongdoing.

Reuters also reports that Morgan Stanley is being sued by Resorts International Hotel Inc., which claims that the firm covertly used Audrey Oswell, its CEO from June 2004 to March 2006, to help with its efforts to acquire a 20-acre site in Atlantic City which it plans to develop into a $1bn casino project. Resorts is now after all profits from the deal. Morgan Stanley has described the lawsuit as 'without merit'.

Finally, The New York Daily News has reported that The New York Stock Exchange has banned former Morgan Stanley broker John Steigerwald for life, after finding that he gained almost $537,000 in commission for the firm (and $91,000 for himself) by the inappropriate trading of client funds in risky short-term trades. The victims included injured children who had their medical malpractice awards invested with the firm.

Have something to tell us about this article?

JefferiesAnd the Best Place to Work in the global financial markets 2018 is...