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dk
A "fat finger" trading incident involving more than 7.2 billion yuan ($1.17 billion) at Everbright Securities Co Ltd on Aug 16, 2013 exposed regulatory flaws and weak links in the workings of the nation's capital markets. Regulators are still investigating the trading error.
Everbright Securities, one of the largest securities brokerages by assets in China and controlled by State-owned financial conglomerate China Everbright Group, said in a filing to the Shanghai Stock Exchange on Sunday that the error occurred within the company's arbitrage-trading system. The original transaction volume was set at 80 million yuan, but a system error caused an unexpected increase in buying orders.
The debacle "has exposed the lack of a comprehensive warning mechanism in the stock exchanges," said Yin Zhongli, deputy director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences.
An effective mechanism would have sounded the warning to traders when an unusually large order was placed, he said.
However, the stock exchange did not respond after Everbright Securities placed 23.4 billion yuan in buying orders on Friday, which was obviously unusual, he added.
Ye Tan, a financial columnist based in Shanghai, said in her blog: "It is unbelievable that such high-value trade can be conducted so smoothly after a serious mistake happened to a brokerage's internal system. Risk control within the stock exchange system is totally inadequate. I strongly fear a more terrible mistake may happen if no measures are taken."
What's more, after a senior executive at Everbright Securities openly denied there were any mishaps at lunch time, Everbright Securities went ahead selling 1.85 billion yuan in exchange-traded funds and, at the same time, sold 7,130 index futures contracts. Market sources estimated that this short-selling had grossed the company at least 100 million yuan as the index plunged after Everbright Securities eventually admitted the mistake at 2:25 pm.
key word
光大证劵ɡuānɡ dà zhènɡ juàn：Everbright Securities Co Ltd
乌龙指wū lónɡ zhǐ：fat finger
调整的tiáo zhěnɡ de：regulatory