[PEN-L:30429] the speed of greed

["Ian Murray" <seamus2001@xxxxxxxxx>]

Bank loses £100m in two-minute frenzy

Jill Treanor and Neil Hume
Saturday September 21, 2002
The Guardian

More than £50bn was added to the stock market value of Britain's 100 biggest companies
yesterday in an unprecedented 20-minute burst of trading which left at least one big City firm
nursing a loss of up to £100m.

Most of the activity took place in a frantic two-minute period which stunned City veterans and
pushed trading systems close to collapse.

The FTSE 100 blue chip index endured a 300-point swing in the busiest trading day on record
when more than double the normal activity took place. In the turmoil:

· One dealer made a £1m profit on BP, the oil company and biggest company in Britain, in two
minutes

· Another at Lehman, the US investment bank, was rumoured to have made £600,000 in three
minutes in trading in Lattice, the gas pipeline company, and Next, the high street retailer

· One investor made £30,000 selling shares in chemicals company Johnson Matthey as the price
rocketed

· The market value of 3i, the country's biggest private equity firm, almost doubled to £5bn

· £24bn was added to the market capitalisation of BP and Shell, Europe's biggest oil companies,
in two minutes

· At the same time Rolls-Royce jumped 35% while accounting software group Sage went up 66%

In the 20-minute period £3.2bn worth of shares changed hands, more than often takes place
during an entire working day. The volume of activity was so large that prices of shares were
delayed as some computer systems across the City failed to cope with the number of deals.

Two big City firms, Swiss-owned Credit Suisse First Boston (CSFB) and Germany's Deutsche Bank
were thought to have been at the centre of the action.

Neither firm would comment last night but some traders said they believed that costly mistakes
had been made, particularly at CSFB.

According to market insiders, a trader at CSFB mistakenly entered an order to buy £1.2bn worth
of shares twice - or even three times - into his bank's dealing system, leaving a loss of
£100m.

The mistake was the opportunity for other traders in the market to make huge profits as the
deal propelled the FTSE 100 index sharply higher.

Sources at CSFB tried to play down any suggestion that the trade had been an error or that
losses had been made.

However, this failed to quash the rumours of anger and recrimination at the bank's headquarters
at Canary Wharf.

The London stock exchange said it was looking into the unusual share price movement while the
financial services authority, the City regulator, was monitoring the situation.

The London stock exchange insisted that its systems had not buckled under the volume of
business.

But what goes up usually comes down: the FTSE 100 index hit a high of 4,060 and a low of 3,755
before ending 46 points up at 3,860, breaking a three-day losing streak.