China Securities Regulatory Commission started investigation of an error made by Everbright Securities, Agence France-Presse said on August 19.
On August 16, the trading firm placed unintended buy orders totaling $3.8 billion. Regulatory Commission said Everbright Securities actions were taken mistakenly and it happened for the first time on the China’s stock market. The glitch caused Everbright's system to send out a spate of buy orders that lifted the Shanghai Composite Index by more than 5 percent. The preliminary investigation showed that the mistake was caused by the vulnerability of Everbright Securities’ electronic systems. The assumption that it was due to the human factor, so-called ‘fat finger’ was disproved.
The brokerage company announced its losses totaled $31 million. The activity of Everbright Securities on the Shanghai stock exchange connected with purchases of securities was suspended for three months. Everbright Securities is determined to cancel some mistakenly taken operations. State-owned China Everbright Group owns Everbright Securities, which is the seventh on the list of China’s brokerages.
Lapses with electronic trading systems happen regularly. In August 2012, Knight Capital suffered a trading error that cost it about $400 million. It was the biggest event of that kind. Knight Capital’s actions led to the regulations for trading robots in the US were enforced. According to various estimates, up to 60-70% deals on the stock markets of the developed countries are conducted automatically.