Investing

Fat Finger Trade Explained

Fat finger trade is a type of trading mistake that results from the inaccurate entry of a trade order, which can cause significant losses to traders or firms.

Fat Finger Trade Example

In 2005, an inexperienced trader at Mizuho Securities , tried to sell 1 share of J-Com stock for ¥640,000. He accidentally sold 640,000 shares, for ¥1 each; the equivalent of selling $3 billion worth of shares, for the price of $5,000.

The Tokyo Stock Exchange suspended trading of J-Com, but declined to specify how it will sort out a mess created by the botched order. Many of the sell orders have yet to be carried out, meaning further trading could "cause instability in the market.

This kind of "fat finger trade" still happens, but there are controls in place in most stock exchanges to prevent this kind of error.