The Tokyo Stock Exchange on Friday rejected a demand from Mizuho Securities Co. to pay 40.4 billion yen in compensation for failing to cancel a massive erroneous order placed by the brokerage, the TSE said.
The rejection makes it likely the case will go to court. Mizuho Securities has set Sept. 15 as the deadline for the TSE to make payment and said it will take legal action, including a civil lawsuit, should the TSE fail to pay up.
In a letter sent to Mizuho Securities on Friday, the TSE turned down the compensation demand, which was made on Aug. 17, the bourse said.
“There was no deliberate or major negligence on our side,” TSE President Taizo Nishimuro said at a news conference in late August. “I do not think we have to make such a massive payment.”
A public relations official at Mizuho Securities refused to comment in detail Friday, saying the brokerage has yet to receive the TSE’s answer.
“We are still in talks with the TSE. We have not reached any decision on how to handle this matter,” the official said.
In December, Mizuho Securities, a unit of Mizuho Financial Group Inc., mistakenly placed an order to sell 610,000 shares of staffing company J-Com Co. for 1 yen, instead of the intended order of one share for 610,000 yen, and incurred a loss of some 40 billion yen.
The TSE later acknowledged that trouble with its trading system played a part in the loss.
Mizuho Securities tried to withdraw the sell order shortly after noticing the mistake, but the TSE’s computer system wouldn’t let it because the computer system didn’t work, causing the brokerage to take a massive loss.
Since late March, Mizuho Securities and the TSE have discussed the possibility of sharing the loss, but they were unable to reach an agreement, leading the securities company to demand full payment.
Mizuho Securities has said the loss it incurred during the period between its placement of the erroneous order and its request for cancellation was only 300 million yen and the TSE is liable for the rest.
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