If you’re a trader, the last 12 months have likely been rather difficult. Banks are becoming more risk-averse, regulators are tightening their noose on trading activities and revenue totals are down in several key sectors, particularly fixed income. It’s also been a banner year for trading errors. Big, headline-making trading mistakes seemingly occur every day. Many are small yet rather humiliating; others are simply devastating.
We recounted the top trading flubs of the last year. Let us know if we missed any.
Count this as one of the humiliating variety. A host of traders looking to get in on the next big social media stock attempted to buy low on Twitter. The only problem was Twitter had yet to IPO. In fact, it had yet to even choose which exchange it would trade on. Still, 4.2 million shares of “TWTRQ” were traded in early October, sending the stock up 1,800%. Unfortunately, traders (and individual investors) were buying up shares of Tweeter, the once-bankrupt home entertainment store. FINRA was eventually forced to halt trading of the stock.
Chinese brokerage Everbright Securities suffered a so-called “fat finger” trade in mid-August that did more than just harm the firm’s bottom line. An accidental series of buy orders sent the benchmark Shanghai index up more than 6% within just a few minutes. The index eventually ended up down on the day. Everbright was fined $86 million and banned from proprietary trading.
Oil traders who follow the Israel Defense Forces Twitter account saw a tweet about airport bombings in Syria and took action, sending oil prices skyrocketing. Unfortunately for them, the tweet was commemorating the 40th anniversary of the Yom Kippur War of 1973. The bombing took place in 1973. "Obviously this was part of our Yom Kippur Twitter series. The facts are there and simple to read. It was apparent within the Tweet itself," said IDF spokesman Peter Lerner.
Another oil trading mistake and another “fat finger” was to blame. Late last year, shares of seven oil-related stocks spiked between 3% and 9% within minutes of each other, only to quickly reverse gains. Following an investigation, it was discovered that a trader entered the wrong size for the transaction, starting the chaos.
Reminiscent of Knight Capital's $450 million trading mess from 2012, Goldman Sachs suffered a system programming error that caused the investment bank to flood U.S. exchanges with erroneous options orders. Many were eventually reversed, but it cost Goldman staffers dearly. Four senior technology specialists were placed on leave and Goldman eventually reorganized its IT hierarchy.
This one was on the exchange, not the traders. CME Group was forced to compensate traders for losses after issuing an erroneous report concerning wheat contracts. Exchanges have had a rather difficult time of it as of late, punctuated by a three-hour outage on Nasdaq in August.
One mistake traders seem to make rather routinely is bragging about their misdeeds, particularly on searchable channels like IM or email. “It’s just amazing how libor fixing can make you that much money,” one trader said through email, as was discovered in February. Then there are the Barclays energy traders, who were busted late last year for manipulating energy markets. “I totally f**kked with the Palo mrkt today. . . . Was fun. Need to do that more often,” one trader said through email.
He’s technically not a trader, but it’s too good not to include. Bristol Myers exec Robert Ramnarine was sued by the SEC last year for insider trading. He made three internet queries from his work computer. “Can stock option be traced to purchaser,” “Illegal insider trading options trace,” and, most amazingly: “Ways to avoid insider trading.”