Fingers ... Fat and Otherwise
May 10, 2010,
Whatever ultimately caused the insane activities in the stock market last week, you have to love the theory that it was the result of what the experts call a "fat finger trade." The technical definition seems to be that some trader somewhere hit the wrong key, hitting a B for billion rather than a M for million when he entered a transaction.
Seemingly this was caused not by stupidity, carelessness, maliciousness or just outright incompetence, but by overweight digits on the key-entering extremity of said trader.
Of course the retail world has known all about fat fingers for years. Fat finger buys have been a staple of the business ever since EDI was created ... and probably before too. How many times have we heard about buyers buying too much of something and then blaming--not stupidity, carelessness, maliciousness or just outright incompetence--but some technical glitch for the problem. A current TV commercial for Marshalls, explaining how the store gets its goods in terms so simple even a customer can understand, is based totally around this concept.
And that's the difference between Wall Street and Main Street. When buyers have screwed up and bought too much, they can just dump it at MarMaxx or Ross. Even simpler, they can just return it to the vendor and say the supplier got their forecast wrong. End of product, end of problem.
Wall Street needs a TJX. A place where erroneously bought stocks and securities can be sold off at pennies on the dollar. Think how many mistakes could be covered up this way. Think about how many traders could look like heroes when they find a place to dump all of those bad deals. Think about how much profit Goldman Sachs could rack up.
Retailers learned this trick years ago and they've been using it on a regular basis ever since.
Are you listening up there in Framingham?