Everbright system fault to blame for Shanghai trading chaos
Human error ruled out as cause of Friday's chaos as watchdog orders China Everbright to suspend automated trading business
China Everbright Securities was ordered by the mainland securities watchdog yesterday to suspend its automated trading business after faults in the system caused chaos on the Shanghai stock market on Friday.
The China Securities Regulatory Commission said after completing an initial investigation that the chaotic trading did not involve human error. It was first thought that the events were triggered by a "fat finger" incident caused by a trader hitting a wrong button and turning trades for 30 million shares into three billion.
Rather, the securities watchdog said Everbright had "design flaws" in its automated trading system and had "obviously inadequate" internal risk controls.
"The investigation did not show human error, but China Everbright Securities has an obvious flaw in its system design and risk control," the CSRC said in a Chinese-language statement on its website. "The Shanghai CSRC has ordered the firm to suspend the related business and to make an internal investigation to … make improvements.
"Meanwhile, the CSRC has decided to conduct a formal investigation and will decide on a possible penalty."
The regulator added that the incident, the first of its kind on the mainland, showed the need for a review to prevent a recurrence.