Sunday, April 15, 2018

"Samsung Securities' $105 Billion Fat-Finger Share Error Triggers Urgent Regulator Inquiry"

What's that boss? There's an extra $52 million in my account? Don't sell it? Thanks boss.

From IEEE Spectrum:

Mistake sparks public outrage at Samsung and securities industry
Last week, an employee of Samsung Securities Co., Samsung Group’s stock-trading entity and one of the largest trading companies in South Korea, accidentally issued shares worth some $105 billion to 2,018 of its employees who are members of its stock-owner program. The employees in the program were supposed to receive a dividend totaling 2 billion won (or about $0.93 per share they owned), but were mistakenly issued 2 billion shares instead. The amount issued was more than 30 times the total number of outstanding Samsung Securities’ shares.

Embarrassingly, Samsung Securities admitted that it took 37 minutes to fix what had occurred after it became aware of the problem. Even more humiliating, sixteen Samsung Security employees were able to still sell off some 5 million shares of their payout, despite repeatedly being warned not to do so by their managers. Perhaps the warnings were ignored because they were able to make about 10 billion won ($9.3 million) each. Four other employees tried to sell their shares, but their trades were stopped before being completed....MORE
The mistake is not the largest. IEEE Spectrum itself  points to the $600 billion+ Japanese fat-finger in 2014 by an as-far-as-I-know-still-unidentified firm. However, for straight-up absurdity the 2005 trade by Mizhuo where the trader not only shorted more than the floating supply, which itself is one of the big no-no's they teach you at junior-trader school, he managed to get off $2.9 billion on a $90 million market cap i.e. 32 times the value of the entire issued and outstanding!
(one contemporaneous account said 41x but their math is suspect)

And to provide an example of the truth of Uncle Dan'l Drew's aphorism during the Erie Wars:
 “He who sells what isn't his'n, must buy it back or go to pris'n.”
 Mizhuo bought the trade back at a $225 million loss when the exchange would not reverse the original sell order.

The Japanese courts later said the exchange was 70% at fault for not cancelling the trade but only had to pay Mizhuo 25% of the loss.

So kids, and I can't stress this enough, do not short multiples of the issued and outstanding.
And I think the really big fat-finger was also Mizhuo though probably not the same guy.