THE LONDON Stock Exchange is investigating the bizarre case of a trader who apparently pressed the wrong button and sold one hundred times as many shares as he intended.

Dealers identified US investment bank Lehman Brothers as the source, and believe rectifying the error cost Lehman £5.8m. City watchdog, the Financial Services Authority is 'monitoring the situation'.

Lehman Brothers International Europe said: 'We decline to comment.' Insiders describe the atmosphere as panicky.

Based at Broadgate in the City, it employs 2,500 people in Britain, trading in shares, bonds and derivatives. Its worst fear must be that outside investors might claim compensation.

The dramatic error came seconds before the market closed at 4.30pm on Monday and stemmed from an attempt to adjust a portfolio to allow for the new weighting of Shire Pharmaceuticals in the Footsie 100 index. Shire's weight in the index rose after it completed a Canadian acquisition. A fund tracking the index would then have had either to buy more Shire or sell other big index shares.

The Lehman trader tried to sell £4.4m of top stocks, but actually sold £440m. The Footsie, already down 70, ended 206.3 lower at 5690.5 wiping an extra £30bn off the value of shares. On Tuesday it regained 152.4 at 5842.9 after the investment bank unscrambled its huge error by buying back stocks.

Punters trading either in the FTSE index or top stocks such as Vodafone, BT and Barclays, which slumped close to 5%, are angry. Heads may roll. One trader said: 'It looks like being very costly for someone.' The Stock Exchange is examining why the bank's monitoring systems did not send warning signals.

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-- Anonymous, May 16, 2001