* HSBC shares spiked 10 pct before erasing gains
* Traders say human error probably responsible
* LSE system kicked in to suspend share and avoid panic
* Identity of the responsible person not yet revealed
(Adds details, comments)
By Steve Slater
LONDON, Jan 30 A trader may have lost about
400,000 pounds ($662,100) in under 30 seconds on Thursday after
causing a 10 percent spike in the shares of Europe's biggest
bank, HSBC, which traders blamed on human error - a
"fat finger" trade.
The jump in the price - a seismic move in a company worth
nearly 120 billion pounds - prompted a "circuit-breaker" to kick
in and suspend HSBC shares from trading for five minutes, after
which an orderly market in its shares resumed.
The London Stock Exchange said its trading system worked as
it should to prevent it sparking a panic.
An LSE spokesman said the spike, which briefly flipped the
entire FTSE 100 index into positive territory, had been
investigated and no trades would be cancelled.
That would be unwelcome news for any fat-fingered trader
sitting on a hefty loss.
Other traders said the person responsible may have input the
wrong quantity of shares to buy or did not spread out the trade
over a sufficiently long period of time for it to be absorbed by
the market, and also probably failed to put in an upper price
Trades are typically divided into small orders by complex
algorithms to get a better price. But these programme trades can
trigger other algorithm orders and have been criticised for
exaggerating market moves.
"These things should never happen if it's done properly,
that's why lots of controls are built into the systems. But it
may be the case that someone manually keyed in the algo and
changed some of the configuration," a trader said.
"There are various scenarios on what could have gone wrong.
But the good thing is people shouldn't do it, and so getting
penalised for doing it (by losing money) means they won't do it
again," he said.
The identity of the trader or company he or she worked for
has not been revealed.
The flurry of action in HSBC shares was sparked at 1120 GMT
and 17 seconds, with an order for 18,049 shares at 629.3 pence,
near where the price was trading.
Hundreds more orders in smaller amounts followed and drove
HSBC's share price to 650 pence within 12 seconds, and then as
high as 688 pence within another 16 seconds. The shares were
then suspended until 1126 GMT.
About 1.9 million shares traded during one minute. That
could have lost the trader about 400,000 pounds for his "fat
finger", based on an average price of 650 pence, though one
trader said it was likely other orders were triggered by the
original mistake so others may have shared that loss.
Algorithms - or what some have dubbed "the rise of the
machine" - have been blamed for adding volatility and prompted
exchanges and banks to increase controls, especially after a
"flash crash" on Wall Street in May 2010, when the Dow
fell more than 600 points in a matter of minutes, sparked by a
large seller creating an imbalance in the market.
Other stocks hit by fat-finger trades include U.S. security
software firm Symantec and American Electric Power
HSBC declined to comment on the move. By 1608 GMT its shares
were back at 630.7p, up a more modest 0.7 percent on the day.
($1 = 0.6041 British pounds)
(Additional reporting by Tricia Wright, Toni Vorobyova and
Alistair Smout; Editing by Will Waterman)