Everbright comes under cosh following Friday market spike
20 August 2013
News, Asia, China
By Toby Garrod
The China Securities Regulatory Commission (CSRC) is blaming Everbright Securities for trading glitches that caused a 6% spike to the Shanghai Composite Index on Friday (August 16). A CSRC spokesman was quoted by Mainland financial website Yicai as saying the issue reflected deficient internal controls and trading system management by the firm.
The trading glitches resulted in massive market orders sending same-day actual turnover on the Shanghai Stock Exchange to 7.29 billion RMB (US$1.16 billion). Meanwhile, Everbright Securities was forced to short 1.85 billion RMB of ETFs and 7,130 lots of stock index futures contracts to counter its position.
The regulator has officially filed the case and says it will announce the results of the investigation soon. It also urges Everbright Securities to launch an internal investigation in order to ascertain responsibility for the problem.
Everbright Securities issued a statement on August 16, admitting that its strategic investment department’s proprietary trading desk had a problem with an arbitrage deal relating to its 180 ETF.
The incident is bound to raise additional concerns about ETFs following the Flash Crash of May 6, 2010 that temporarily erased over US$1 trillion of the Dow Jones Industrial Average. ETFs accounted for a notable 68% of the 20,000 trades reversed by the regulators for being unfairly executed more than 60% off their values minutes earlier.
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