Mizuho Securities loses $223m in trading error

LOSSES & LAWSUITS

J-Com had just completed a $14 million initial public offering on the Tokyo market for smaller companies.

J-Com's shares, which were listed at ¥610, 000, dropped immediately to ¥572, 000 shortly after listing when the order was received to sell around 610, 000 shares at ¥1 each, instead of ¥610, 000 per share. As a result, J-Com sold only 2, 800 shares on its debut at the exchange.

Mizuho tried to rectify the mistake by buying back the shares through proprietary trading, which allows a bank to use its own reserves as capital for trades.

At the end of December, Japan's Financial Services Agency said in a statement that Mizuho had failed to train its traders sufficiently well, and did not have senior management in place to oversee these operations. The firm must submit a plan to the regulator to improve its business processes, and it must also clarify who was responsible for the trading error and designate a crisis management team.

The regulator also ordered nearly 300 brokerage firms in Japan to examine their stock trading systems and internal controls, and report by January 20 on needed improvements.