Chubby Digits

A Citi trader cost his bank $50 million by typing an extra zero. [The Rude Awakening] March 27, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Chubby Digits [Sean Ring] SEAN RING Dear Reader, Chubby digits are those five things on every trader’s hand that make him “fat finger” a trade. Today, I’ll share my horror stories of fat-fingering trades as a broker with you. Every time I read about banks losing huge sums because one of their brokers did something they shouldn’t have, I mildly wince. I wince because I’ve made every mistake in the brokering book. But luckily for me, over a decade and a half have passed since I was a broker, so the pain is mild. Below is a great example of a fat-fingered trade. Citi Trader Adds Extra Zero To Order; Loses $50 Million A Citi trader fat-fingered an extra zero onto a trade about two years ago. This sent the OMX Stockholm Index down over 100 points. From [Zero Hedge]( Fast forward to today when we find that said shitty math'ed fat-finger will cost Citi losses of at least $50 million, according to Bloomberg, while adding that the bank is still tallying losses from the mistaken trade and the final figure could balloon even higher. As we also reported before, the fat finger took place when a trader in the firm’s Delta One trading unit in London was working from home during a bank holiday on May 2 when the person incorrectly added an extra zero to a trade early in European market hours, sparking a furious five-minute selloff in the OMX Stockholm 30 Index which quickly spread across markets from Paris to Warsaw, wreaking havoc and wiping out 300 billion euros ($322 billion) at one point. [pub] Credit: [Zero Hedge]( A few words from me on this. Luckily, I was only a futures broker, so it was next to impossible for me to lose that kind of cash accidentally. My most significant error cost $125,000, and I’ll never forget it. That amount is enough to get you in the boss’s doghouse, but not enough to get you fired. At least the first time. However, a $50 million mistake will get you fired immediately. I’m sure this broker didn’t mean to make this mistake. Adding an extra zero when typing in a trade is surprisingly easy. But clients trading this amount early in the morning, before the market is liquid, seems dumb to me. [Urgent Publisher Warning]( Hi, I’m Matt Insley. I’m the Publisher at Paradigm Press. Today, I have [bad news to share]( regarding the future of Jim Rickards’ newsletter. [>> Click here now for my announcement.]( [Click Here To Learn More]( Why You Don’t Trade With Low Liquidity Unless You Want To Set Off An Avalanche I’ll never forget this one time when a hedge fund manager called me up. He said, “Sell 2,000 10-year futures at market.” A market order is when a client specifies only the trade volume, but not the price. Market orders incur “gap risk,” which means the markets can move far from the initial market price. This happens when the market is illiquid. As a broker with a fiduciary duty to my client, I said, “It’s 6:30 am London time, 1:30 am New York time. There’s no liquidity in the market right now.” “JUST SELL THE GODDAMN THINGS!” “Ok.” I sold 2,000 10 years, sinking the market one whole point. (It’s an enormous move in that particular market.) As a young broker, I didn’t divine that this client wanted to tank the treasury market. This client intended to set off all the sell stops to shake the weak longs out of the market. It worked. You see it all the time in the gold market nowadays. But most of the time, big moves like this are an accident. What Operational Risk Is And Why You Can’t Get Rid Of It The Basel Committee on Banking Supervision defines [operational risk]( Operational risk is defined in the capital framework as the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. This definition includes legal risk but excludes strategic and reputational risk. The “people” part is the problem. And not just because people still input trades. People create processes. People build systems. And people can’t foresee the unforeseeable external events known as “black swans.” Now you may say, “Well, just be more careful!” Sure. Valid point. But things get dicey when a client is screaming down the phone to get his trade done. And sometimes, shit just happens. I’ll never forget when a trader blew up the German bond futures market. I was sitting at my trading desk with my feet up, as it was that quiet. The next thing I knew, my dealerboard lit up like a Christmas tree. At first, I thought it was a malfunction. But then I saw my biggest client’s button flashing. I picked up the phone. “What happened to the bunds?” Note: Germans can’t pronounce “bonds” correctly, so they say “bunds.” The bunds had fallen off a cliff. I had no idea why, but I said, “Institutional selling out of New York.” I always said that when I didn’t know precisely why something was happening. I stood up from my desk to see my colleagues also standing up with their hands in the air. No one knew what was going on. About two weeks later, we found out it wasn’t a fat finger. It was an errant tray. This trader was under a bit of stress. Allegedly, his wife was pregnant and imminently due to give birth. His dealerboard was flashing her phone number as he was coming back from lunch. He caught the blinking button as he came around the corner with his lunch tray. He put the tray down to pick up the phone. It was his wife, calling to say everything was ok. Except it wasn’t. This trader was looking at his screen, seeing the German bond market tanking. Since he was the German bond trader at his firm, he was puzzled. Until he realized he inadvertently set his lunch tray down on the “sell” button. Oops. He had sold nearly a quarter of a billion German bonds in a few microseconds. His bank was sympathetic and didn’t fire him. Ah, the good old days. Wrap Up The only reason why I don’t mind reading about other traders’ misfortunes is that I didn’t do it this time! But banks have been trying to solve these kinds of problems for a long time without much success. “Measure twice, cut once” works for tailors because they don’t have their clients screaming down the phone at them, “WHERE’S MY GODDAMN SUIT!” It’s much different when dealing with hedge funds, asset managers, and other banks. In the meantime, bathe in your schadenfreude. The so-called Masters of the Universe screw up regularly, with enormous consequences. Have a great day! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( In Case You Missed It… Key Bridge Collapse [Sean Ring] SEAN RING “How could that plane possibly have hit that building?” I asked myself as I watched the aftermath of the 9/11 attack. I was flabbergasted at my desk on the trading floor in London. Then, the second plane crashed into the towers. Clearly, this was a terrorist attack. I was so confused at first because I had flown from Newark to London a half-dozen times by September 2001. The sky is wide open over NYC. You’d have to try to hit the Trade Center; it wouldn’t be an accident. That second explosion confirmed my hypothesis. Baltimore Bridge is Falling Down All these feelings rushed back to me this morning as I watched a video of the Dali, a boat registered in Singapore, smashing into the Francis Scott Key Bridge in Baltimore at 1:27 a.m. ET. I was sitting at Fabrizio’s, drinking my morning Americano thinking, “How could that ship possibly have hit that bridge?” Interestingly, the Dali hit the bridge on its way out of Baltimore to Colombo, Sri Lanka, not on its way in. I assume the ship successfully navigated its way upstream. Once I found that out, I did a bit of digging. Why is the Key Bridge Important? I don’t want to be an alarmist. And I have absolutely no proof of anything. But what if this was one step in an intricate terrorist attack? I ask only because I find it difficult to believe that the helmsman accidentally steered his ship into the bridge. [Baltimore map] Credit: Google Maps The interesting thing about the Key Bridge is that it’s the bridge you take when you want to avoid the city center. That means now that this bridge is taken out, you’re forced to drive through Baltimore proper. If you’ve seen the movie The Sum of All Fears, you may be getting a small frisson running up your spine. [URGENT: Your New Crypto Book Is Awaiting Shipment]( If you’ve kicked yourself for not investing in cryptocurrency… [James Altucher]( Watching Bitcoin go from $61… To $1,000… To over $60,000… Then pay close attention. Famous crypto millionaire James Altucher just released a brand-new book on crypto… [And he’s releasing a limited number of books to folks who click here now](. We have a copy reserved in your name, and we just need to hear back from you. [Click here now to see how to claim your copy](. [Click Here To Learn More]( Operational Reasons to Hit the Key Bridge The bridge is part of the Baltimore Beltway (Interstate 695), connecting the eastern and western parts of the Baltimore metropolitan area. This makes it a crucial route for daily commuters and for maintaining local traffic flow, helping to alleviate congestion in the downtown areas. The bridge supports the local and regional economy by facilitating the movement of goods and services. It's an essential route for commercial vehicles, connecting various parts of Maryland and beyond, thus playing a vital role in the logistics and supply chain networks. By targeting this major transportation link, terrorists might aim to disrupt economic activities, causing not just immediate damage but also long-term economic impacts. The bridge is crucial for the movement of goods and services, and its incapacitation could lead to significant supply chain disruptions, affecting both local and national economies. The bridge is strategically located near the Port of Baltimore, one of the major ports in the United States, which handles a significant amount of cargo every year. By providing direct access to the port, the bridge helps efficiently transport goods to and from the port, underpinning its role in international trade and commerce. Given its importance to the region's transportation network and its proximity to the Port of Baltimore, the Francis Scott Key Bridge represents a strategic point. Disrupting access to the port could have significant implications for trade and national security, making it a potentially attractive target for those wishing to impact the U.S. strategically. In scenarios that require rapid deployment or mobilization (such as national security events or natural disasters), the bridge's role in facilitating quick movement across the bay becomes even more critical. It can serve as a key route for emergency services, military personnel, and equipment. Named after the author of the United States national anthem, the bridge also carries cultural and historical value. This symbolic importance can translate into a strategic consideration, particularly in maintaining and protecting the infrastructure that holds a place in national identity. High-profile targets like major bridges often attract extensive media coverage, which can amplify an attack's psychological impact, spreading fear and uncertainty among the public. Terrorists often seek this kind of widespread attention to further their goals or spread their message. Let’s Get Real I hope you can write me in a few weeks to say, “Gee, Seanie, you jumped the shark on that one!” Or, “Next time, look before you leap.” Or, even, “Way off on that one, Seanie!” But my job is also to anticipate what may come. Taking out a major artery the US military uses to mobilize its assets tells me that the game may be afoot. That said, it may be just a drunken sailor misreading his instruments in the dead of night. Wrap Up A Singapore-flagging ship making its way from Baltimore to Colombo hit and destroyed the Key Bridge. Though we don’t know for sure yet, many lives were lost. But since it was so early in the morning, it could’ve been much worse. Let’s pray for the victims and also spare a thought for the authorities. Either way, they need to be sure whether it was an accident or an attack. The Chinese say, “May you live in interesting times.” But they say it ironically. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. 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