£10m blunder on electronic trading system

A junior trader cost his employer £10m after accidentally instigating a £11.5bn futures transaction when he hit the wrong computer keys.
Written by Chiyo Robertson, Contributor

The German-based employee's blunder caused panic across City trading floors as screens flashed the news that that someone wanted to sell 130,000 German bond futures contracts worth £11.5bn -- the largest single trade in German futures.

The trader's employers, believed to be a German financial institution, is now obliged under contract to fulfill their purchasing commitment by buying bond futures contracts on the open market. The employee was taking part in a training exercise at the time.

Baffled traders mistook the message for a "Rio trade", the name given the a last-ditch attempt to recover losses by betting their bank or financial institution. If that fails they buy a one-way ticket to Brazil. Traders expressed amazement that the trainee was able to complete the transaction without setting off alarm bells because of the sheer size of the deal.

The bond futures used to be dealt on the LIFFE via hand signals, but the City trading has been largely automated. The dealing program for the Eurex German electronic exchange where most German bond futures contracts are traded is reportedly very easy to confuse with the trading training software package.

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