The international stock markets dodged a bullet this week. According to news reports like this one in Reuters, Deutsche Bank's proprietary trading unit in Japan mistakenly placed sell orders of Y16.7 trillion ($182 billion) at the Osaka Securities Exchange on Tuesday when it first opened.
The reason was a software problem.
"There was a software glitch in our automated trading system, and the consequence of the error was that a number of trades were repeatedly sent to the exchange... The error was recognised and we immediately placed cancel orders on 99.7 per cent of the trade. There is an issue somewhere in the software that needs to be identified."
A software "issue somewhere"? Not exactly a confidence building statement, is it.
Deutsche Bank said that it has suspended its proprietary trading in Japan until it is sure the problem won't reappear while the Osaka Securities Exchange says that it is investigating the incident.
The error caused the Tokyo Stock Exchange's Nikkei-225 futures index to lose 110 points or one per cent. If mistake hadn't been caught quickly, it could have caused a repeat of the Dow flash meltdown of a few weeks ago some analysts said.
Investigations into that incident are still underway with no root cause(s) specifically identified as of yet, although myriad theories abound. New circuit breaker rules go into affect next week on the major US exchanges in a bid to keep another flash crash from happening again.
Robert N. Charette is a Contributing Editor to IEEE Spectrum and an acknowledged international authority on information technology and systems risk management. A self-described “risk ecologist,” he is interested in the intersections of business, political, technological, and societal risks. Charette is an award-winning author of multiple books and numerous articles on the subjects of risk management, project and program management, innovation, and entrepreneurship. A Life Senior Member of the IEEE, Charette was a recipient of the IEEE Computer Society’s Golden Core Award in 2008.