UBS AG said its Japanese unit mistakenly ordered 3 trillion yen ($30.9 billion) of Capcom Co. convertible bonds, 100,000 times more than it intended, because of an internal system error.
The trade on the Tokyo Stock Exchange's ToSTNeT system was cancelled at no cost to UBS, Switzerland's largest bank said in an e-mailed statement today. ''UBS apologises for the error and any inconvenience caused to market participants,'' the Zurich-based bank said in the statement.
Ryosuke Tanaka, a spokesman from Capcom, known for "Biohazard" and "Street Fighter" game series, said the company had received an apology from the TSE for causing inconvenience. "But since the CB is set to mature next month and trade volume has been small, we see this as causing almost no harm for us," said Tanaka.
The exchange suspended trading in the bonds after the transaction was entered and said there would be ''little impact'' as it was a so-called cross trade, agreed off market and reported to the exchange. However, it is far from the first time that UBS or other firms have made similar errors in Japan.
USB has insisted that the mistake was not simply human or a "fat finger" mistake, where a worker types in too many zeroes. Thankfully for UBS, the order was made in electronic out-of-hours trading, which analysts said made it easier to cancel.
The bourse said it received a cancellation request for the cross-trade, in which UBS Securities Japan simultaneously placed both buy and sell orders using the bourse's system for off-hour trading. Both orders amounted to 3 trillion yen ($30.9 billion) - far exceeding the 15 billion yen bond 9697C5.T issued by Capcom in December 2001 with a maturity set for 31 March.
This is the second time in eight years that a UBS unit or other company has given the Tokyo Stock Exchange an incorrect order. In 2001, a UBS business mistakenly issued an order to sell shares in Japanese advertising firm Dentsu. USB subsequently had to buy more stock in Dentsu in order to honour the order.
In 2005 a Mizuho trader mistakenly agreed to sell 610,000 shares for as little as 1 yen each, rather than one share for 610,000 yen. As a result of an error on the Tokyo Stock Exchange's computer systems, it would not respond to Mizuho's repeated attempts to cancel the deal. As a result, Mizuho was left with a 40.5 billion yen ($224 million) loss. (See: A ¥en too far: wrong trade leads to $224 million loss)
The then boss of the stock exchange, Takuo Tsurushima, was forced to resign as a result of the error. These incidents resulted in the exchange introducing new rules in 2007 to allow erroneous orders to be cancelled more promptly.
Regulators at the Basel Committee on Banking Supervision last year began a study of 120 financial companies to examine losses from fraud, computer, or human error, known as operational risk, to collect data and help stop such errors across borders.