Everbright Securities hit with record fine for trading error
Mainland securities company ordered to pay 523 million yuan penalty, while four executives are fined and barred from industry for life
The mainland securities regulator fined state-controlled broker Everbright Securities a record 523 million yuan (HK$663 million) for a trading error that caused chaos on the Shanghai stock exchange two weeks ago.
The China Securities Regulatory Commission (CSRC) urged other institutional investors to focus on risk control to prevent similar incidents from happening again.
It said the system fault in Everbright's proprietary trading unit should see all securities firms examine their practices. It warned them to be careful with program trading - a popular investment strategy in which a computer is programmed to trade in response to selected conditions.
The fines were a message … [the] regulator has zero tolerance for irregularities
Everbright's improper gain of 87.2 million yuan was confiscated, and the brokerage was fined 436 million yuan for misconduct, the CSRC said.
Four senior Everbright executives, including Xu Haoming, the president, who resigned last week, were barred from the stock market for life, and each of them was fined 600,000 yuan, it added.
"The fines highlighted the regulator's determination to punish those violating laws and regulations," the CSRC said. "The regulator will stand firm against irregularities to ensure fairness in the market."
On the morning of August 16, an erroneous trade caused by Everbright's "arbitrage system" mistakenly placed a buy order for more than 20 billion yuan of shares. Transactions worth 7.3 billion yuan ensued.
The glitch caused the benchmark index to surge nearly 6 per cent within minutes and then slump back to its earlier level.