Bear Stearns Enters Erroneous Sell Order
Wed Oct 2, 7:11 PM ET
NEW YORK (Reuters) - A slip of the finger led Bear Stearns Cos. Inc. on Wednesday to erroneously enter an order to sell $4 billion worth of stocks, the New York Stock Exchange ( news - web sites) said.
The order about 20 minutes before the closing bell was the result of a "clerical error" and should have been entered as $4 million, the exchange said in a statement. All but $622 million of the orders were canceled before execution, it said.
Bear Stearns told Reuters the error will have no material impact on the company and declined to comment further.
After a seesaw session, stocks sank in trading Wednesday, with the blue-chip Dow Jones industrial average falling 183.18 points, or 2.3 percent, to 7,755.61.
"When a large brokerage house like Bear Stearns sells a large quantity of anything, people assume Bear Stearns knows something and it will move the price," said Daniel Weaver, associate professor of finance at the Zicklin School of Business at New York's Baruch College. "It was a bear sign from Bear Stearns."
The NYSE said the sell orders were for $4 billion worth of "S&P securities." It could not be reached for further clarification as to which stocks may have been affected.
"It's not very common," said Richard Repetto, an analyst with Putnam Lovell NBF, of seeing this type of error on the New York Stock Exchange. "This is a human error; it's not an electronic error."
A source familiar with the situation said the erroneous order was not a trader error, but a clerical error.
Weaver said he expects Bear Stearns to try to unwind, or cancel, the trades that were executed.
"But you have to have the other person willing to do it," he said. "It depends on their relationship with the other brokers. Since it happens to everybody, some of them are going to be willing to do it to the extent that they can."
This past June, shares of Nasdaq share dealer Knight Trading Group dropped more than 50 percent in before-the-bell trading after a software glitch triggered an accidental wave of selling in its own shares.
Errors like the one witnesses Wednesday tend to occur when clerks type in the wrong ticker symbol or the wrong price for a stock when they are buying or selling shares, Weaver said.
"I bet you everyone now tweaks their systems to make sure that they catch orders that are extraordinarily large," he said.
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