CSRC Widens Everbright Glitch Probe

Everbright's stock price has dropped by nearly 20 percent since the error.

The China Securities Regulatory Commission (CSRC) has announced that it will expand its investigation of trading systems to include all Chinese brokerages, following a glitch in Everbright Securities' high-frequency engine that caused it to mistakenly make 23.4 billion yuan (approximately $3.4 billion) in buy orders last week.

Everbright, a state-controlled business, is one of China's largest securities brokerages. Its glitch led to the replacement of the company's president, Xu Haoming, and the CSRC was initially investigating whether Mercrtsoft, the supplier of its system, was at fault for the technical failure of the system.

"On August 16, the arbitrage system with such design defects as program call errors and quota control failure was triggered successively, resulting in massive amount [sic] of market purchase orders being directly submitted to the SSE with total declared purchase of RMB 23.4 billion and actual transaction of RMB 7.27 billion," says a CSRC spokesperson, in a statement. "On the same day, Everbright Securities sold RMB 1.85 billion worth of shares via ETF and sold short 7130 lots of stock index futures contracts."

The expansion of the investigation comes after CSRC's Shanghai bureau recommended a series of remedial measures at the brokerage, which also suffered another recent trading loss in the bond markets due to human error.

"As the first ever case of its kind in China ever since the establishment of China's capital market, this incident is an extreme exception," the CSRC adds. "However, the problems it revealed should alert all participants in the securities and futures industry."


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