Everbright Securities hit by another trading blunder in Shanghai

As regulator probes glitch that sparked Friday buying frenzy in Shanghai, trader mistakenly sells 10m yuan worth of bonds too cheaply

PUBLISHED : Tuesday, 20 August, 2013, 12:00am
UPDATED : Tuesday, 20 August, 2013, 5:42am

China Everbright Securities, already in hot water over an erroneous trade that caused the key mainland stock index to jump nearly 6 per cent on Friday, reported another glitch in bond trading yesterday.

A trader mistakenly sold 10 million yuan worth of government bonds at a price much lower than the market average, resulting in a loss of around 120,000 yuan (HK$150,000).

The "fat finger" trade on the interbank market added to Everbright's woes. Last week's trading error had already prompted the China Securities Regulatory Commission (CSRC) to start an investigation after millions of furious mainland equity investors had their fingers burned in the mini-rally.

"We will take a series of measures to deal with the problems," Everbright board secretary Mei Jian said yesterday. "They have reminded us of the need to strengthen the management."

We will take a series of measures to deal with the problems

On Friday, a "technical glitch" in Everbright Securities' "arbitrage system" led to billions of yuan of buy orders of some shares at hefty prices, sending 16 heavyweight stocks soaring to their 10 per cent daily upper limit.

As a result, the Shanghai Composite Index jumped by 5.6 per cent before retreating in the afternoon and finally ending the day 0.6 per cent lower, leaving investors who had joined the morning rally in the red.

Mei denied speculation that police were now involved and said the latest problem was caused by the IT system of its trading platform. He admitted that a "firewall" should have been activated to halt the irrational surge in buy orders but for some reason it was not.

"It is believed some senior executives will be held responsible for the scandal," said a source close to the CSRC. "The regulator, already under pressure to bolster a weak market, is determined to better police the trading activities of brokerages to allay the concerns of retail investors."

The Shanghai Composite Index was among the world's worst-performing stock indexes between 2010 and 2012.

The CSRC said Friday's incident did not involve "human error" but it was still investigating. More than 7 billion yuan worth of shares were bought by Everbright Securities in Friday's trading error as the Shanghai Stock Exchange refused to cancel the transactions after the error was discovered.

The brokerage is a subsidiary of China Everbright Group, which is also involved in an anti-bribery investigation opened by the US authorities.

The New York Times has reported that US regulators are investigating whether JPMorgan Chase hired the son of Everbright Group chairman Tang Shuang- ning in the hope of winning deals from the state-owned financial conglomerate.