05/26/2024 – 20:17
A broker cost Citigroup $78 million in fines last week by incorrectly keying in a stock sell order. It’s a gaffe that ordinary investors like Derek Robinson, from Seattle, in the United States, can identify with.
The 45-year-old electrician was rushing one day last year to join an investing trend he read about on Reddit. In his haste, he typed the wrong symbol.
“A biotechnology company was in a pinch,” he said. “I tried to go straight in at the end of the day and I set the clock wrong.” The mistake left Robinson with $500 worth of shares in shipping company Imperial Petroleum, whose ticker symbol is IMPP. He intended to buy shares in Immutep, which specializes in cancer immunotherapy and known as IMMP.
Erroneous stock purchases like Robinson’s account for less than 1% of all trades, but that amounts to a staggering $3.5 billion per day based on current trading volumes, according to Rutgers University finance professors Vadim Balashov and Andrei Nikiforov.
They estimate that more than half of the stocks traded on Nasdaq and the New York Stock Exchange at any given time have similar tickers, making them ripe for confusion.
Errors are not always immediately apparent. Robinson only discovered his mistake the next morning, when he saw that Imperial’s shares had risen by about a dollar, but his holdings had not changed. “I realized I was losing money on a trade where everyone else was making money,” he said.
Robinson stayed with Imperial in the hope that it would become a moneymaker. That gamble paid off; shares are up 56% year to date, while Immutep is up 25%. “I was lucky,” he said.
Still, he changed the way he invests. “I am more slowly following the Reddit collective minds in trading, and if I do, I will be exercising more caution,” he said. “I’m double-checking myself and triple-checking the feeling.”
In the case of Citi, an “input error” by an anonymous trader led to the sale of $1.4 billion worth of shares, triggering a “flash crash” in European stocks. It’s unclear exactly how the error occurred.
But racing to beat the clock is a common reason investors cite when they buy the wrong stocks, as are old-fashioned typos.
Others blame companies for choosing stock symbols that sow confusion. Consider that the automaker Ford trades under F – not FORD, which is the ticker for Forward Industries, a design and manufacturing company.
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