How to Avoid a "Fat Finger" Blunder

The term "fat finger" comes from sloppy typing on a keyboard or smartphone with unintentional results. In finance, a "fat finger trade" means mistyping an order, such as billions instead of millions. Oops.

In a financial world increasingly dominated by technology, "fat finger" errors are a quaint reminder that humans can make a difference — and wreak havoc.

Just recently, a massive "fat finger" error occurred in South Korea when a Samsung Securities Co. employee accidentally issued around 2.8 billion shares (around US$105 billion worth) to staff as a dividend payout. The company's intention was to issue dividends¹ worth 2.8 billion South Korean won (South Korea's currency), which would equal less than US$3 million. The Wall Street Journal called it one of the world's largest "fat finger" errors.

It's a good reminder that human errors happen...and that a small typing error can mean a big financial headache. Self-directed investors know the importance of reviewing all orders closely, but it never hurts to have a quick checklist in mind for each transaction. When it comes to stock order entries, here are few things to keep in mind to help avoid any dreaded "fat finger" errors:

1. Take a quick pause...which can help you confirm that the stock you're about to add to your portfolio is in line with your risk tolerance and goals.
2. Confirm you've chosen the stock you meant to — double check things like which exchange the security is listed on (often stocks are dual-listed) and that it's the type of share you're looking to buy, such as common or preferred (preferreds will have an addition to the stock symbol such as ABC.PR.A). Entering the company name in the search field will show you a list of investments related to that company.
3. If you've got more than one account, make sure you've chosen the right one for this transaction (paying particular attention to whether you've chosen to transact in Canadian or U.S. funds, since an error can mean unwanted foreign-exchange fees)
4. Double-check that you've entered the number of shares you intended to buy (or sell) and confirm the dollar amount using the online calculator.

All of these checks can be done as you complete your order form, but you'll get another chance to review your selections on the Confirm Transaction page.

As for the "fat finger" blunder in South Korea in early April, The Wall Street Journal reported it took Samsung Securities more than half an hour to realize the mistake and halt trading. By then, 16 of the brokerage's staff members had sold around 5 million of the shares, worth nearly US$187 million.