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Interestingly the Tokyo Stock Exchange did not countermand an order from Mizuho in 2005 which flipped order quantity and price in yen, a rather catastrophic thi
by patio11 3y ago
Interestingly the Tokyo Stock Exchange did not countermand an order from Mizuho in 2005 which flipped order quantity and price in yen, a rather catastrophic thing to do when the intended trade was one share for about 600,000 yen.
Regulators were… not pleased.
(Quick English summary of incident: https://www.foxnews.com/story/typing-error-causes-225m-loss-at-tokyo-stock-exchange https://www.foxnews.com/story/typing-error-causes-225m-loss-... )
- xoranth 3y agoUS exchanges tend to either bust or price-adjust clearly erroneous trades retroactively. That is good for unsophisticated customers, but it creates a disincentive for market makers to provide liquidity when there is a fat finger event. That in turn leads to larger price dislocations on such events. (The reason is that the market maker faces adverse selection. Providing liquidity is a bet from the market maker that the price dislocation will revert. Price adjustment reduces the profit the market maker makes from mean reversion. But if the price dislocation was caused by a real news, the market maker will eat the full losses.)