A fat finger trade refers to an erroneous action caused by a mouse misclick or punching the wrong key — often resulting in huge losses for the initiator and windfall gains for counterparties.
The Clean Science and Technology block deal saga was one such reminder about the damages a “fat finger” trade could inflict. What started off as a plan for promoters to sell 24% of their overall holdings, ended up with 56% of the company’s equity changing hands, due to a “punching error”. Within a span of 10 minutes, the stock tanked, recovered from those losses, surged as much as 7%, only to give up all of those gains soon after and trade with losses.
The Clean Science management clarified to CNBC-TV18 by 9:40 AM, that it was a ‘punching error’ by Avendus Spark, confirming the block size was only 24%. It later issued the same clarification to the exchanges later in the day.This is not the first such episode. A trader in September 2023 punched a “fat finger” trade in the 67,000 Call option of the Sensex, wherein a trade was punched at 40x the market price, which sent the premium of the strike from ₹4 to ₹209 in a matter of minutes, and lead to a loss of ₹78 lakh for the trader, as reported by Moneycontrol.
Back in 2012, Emkay Global Financial Services reported a major loss when a dealer accidentally punched a ₹980 crore Nifty derivative trade to sell 17 lakh Nifty units instead of an order worth ₹17 lakhs, leading to the index tanking 15.5% instantly, on October 5, 2012. The matter went as far as the Securities Appellate Tribunal (SAT), but the trades were never fully annulled, and a fine of ₹25 lakhs was eventually imposed by the NSE’s Disciplinary Action Committee, on Emkay Global.
CNBC-TV18 spoke to some dealers, who highlighted that the shares pending to be squared off after the session, if any, could also be marked for auction in the upcoming session. Additionally, if a settlement has to be made, the buyers of the shares can be reached out via the help of the exchanges and an agreement to reverse the same can be reached.
As per exchange by-laws, a bourse may cancel a trade if it deems it fit for annulment on the grounds of “fraud,” “wilful misrepresentation,” or a “material mistake in trade.”
Clean Science also said in its exchange clarification that the promoter entity did sell 24% stake through the block deal. That stake was purchased by SBI MF, Nippon India MF, among other funds, according to Index data. Clean Science involuntarily ended up contributing to 42% of BSE’s overall turnover on Thursday.
