$182 billion mistake nearly downs Osaka Exchange

Posted by Emory Kale

Computers are trying to bankrupt everyone. They don't need no stinkin' T800 to kill John Connor.

This past week, Deutsche Bank's proprietary trading unit put in a whacko order for the Nikkei 250 which could have resulted in a $182 billion mistrade, or if you prefer your end of world scenarios in bigger numbers, a 16.7 trillion yen disaster.

According to Reuters:

"At the market open on Tuesday, Deutsche's trading system erroneously sent 6,910 orders for Nikkei 225 futures contracts and 558 orders for Nikkei mini futures to the exchange, a person close to the matter told Reuters."

This debacle avoided is not that far removed from the May 6, 2010 "flash crash" in the US. During that crash, S&P 500 stocks saw share prices yo-yo wildly in a nine minute period. Among the blue chips, Procter & Gamble lost 357% of its value and the Dow Jones dropped 1,000 points. To people with money, that's a big freakin' deal. Apparently, the military-industrial complex got hoisted by its own petard, but I have no idea what that means either.

In the meantime, it seems that the financial industry fiddles while the rest of us burns, although they keep having talks about circuit breakers, and safeguards to stop this sort of thing repeating itself.

Although it has happened before. There was the flash crash of 1962. No less an august body than the Wall Street Journal says:

"The 1962 flash crash stepped up public pressure on the SEC and Wall Street to clean up trading procedures. But by the summer of 1968, billions of dollars' worth of trades were going astray every month, and the major stock exchanges had to close down on Wednesdays so brokers could get a midweek breather to catch up on processing delays.

The crash of 1962 is a reminder that markets always have been messy and that investors' morale always has been fragile. What's more, the problems the regulators sought to solve nearly a half-century ago are still with us today. They probably will be tomorrow, too."

They also have a piece about how investors can benefit from flash crashes, too.

We're doomed. Doomed, I tell you!