Several brokerage houses lack a counterchecking system to prevent orders from being misplaced in stock and convertible bond transactions, according to the results of a recent survey conducted by the Tokyo Stock Exchange.
The TSE conducted its survey on measures taken by brokerages to prevent erroneous orders after UBS Warburg (Japan) Ltd. and Deutsche Securities Ltd. made waves in the market between late November and early December by issuing massive erroneous sell orders.
All 113 firms surveyed said they have a primary system to prevent transactional mistakes, such as computer alarm functions that are programmed to sound if the number of shares ordered, bidding or asking prices exceed certain levels.
Twenty-four of the firms surveyed, however, said they do not have a secondary system, such as ensuring that a staff member other than the one who originally entered a given order reconfirms that order when the alarm function is activated.
On Nov. 30, UBS Warburg mixed up share prices and numbers while issuing sell orders for advertising agency Dentsu Inc.
UBS Wurburg was later forced to secure enough shares in Dentsu to settle trades it erroneously executed when the advertising agency debuted on the Tokyo Stock Exchange.
The securities house, a unit of international banking group UBS AG, borrowed the shares from other brokerages to settle the deal at huge losses.
On Dec. 3, meanwhile, Deutsche Securities placed erroneous sell orders for Isuzu Motors Ltd. shares.