THE Japanese stock market, still smarting from the biggest trading error in its history last month, has begun the new year with another $10 million (£5.7 million) “fat-finger” blunder.

In the year’s first trading session an employee of Nikko Citigroup, the investment bank, was hoping to top up his private portfolio with two shares of Nippon Paper, an industrial group whose stock usually trades at about 510,000 yen (£2,515) per share.

Following strict company rules, the man, who does not work on the equity trading floor, conducted the transaction through Nikko’s own trading department but accidentally sent an order for 2,000 shares — a volume that now gives him control over 0.2 per cent of Nippon Paper.

When the mistake was noticed, moments later, he tried to sell the unwanted 1,998 shares but, on a day of erratic trading, was unable to dump them immediately.

Last month a trader at Mizuho Securities cost his firm more than £200 million in rectifying a similar botched trade in which he had accidentally sold 610,000 shares in the newly listed J-Com for one yen each, rather than the one share at 610,000 yen that he intended. Recriminations over the lack of controls at the Tokyo Stock Exchange led to the resignation of its chief executive.

The latest howler leaves only Nikko Citigroup red-faced. The exchange had no reason to question the purchase of 2,000 Nippon Paper shares, which is the sort of volume that could easily be traded in the course of normal dealing.

What has sounded alarm bells is the failure of the Nikko Citigroup compliance department to spot the error before passing the order on to the company’s trading desk. Among other things, the compliance department is supposed to check whether employees have enough money in their accounts before allowing a trade to go ahead. The $10 million purchase represented about 74 times what the luckless employee had in his account.

The trade caused Nippon Paper stock alternately to soar and plunge by its daily limit. The shares are now technically owned by a special Nikko Citigroup account that has been set up while the Financial Services Agency and other regulators work out how the issue will be resolved. Nikko Citigroup said yesterday that nobody would lose their job over the incident.

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