Chinese regulators blame brokerage's computer for stock frenzy

Chinese regulators blame brokerage's computer for stock frenzy

Summary: A software design flaw at Everbright Securities was apparently the cause of last week's wild trading swings on the Shanghai Stock Exchange, rather than earlier suspected human error.

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TOPICS: Software, Banking, China
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The wild swings in Chinese stock prices last Friday was apparently caused by a design flaw in a brokerage's computer system.

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Chinese regulators blame brokerage's computer for stock frenzy.

China's main market index had spiked nearly 6 percent in 3 minutes before dropping back, as a result of an avalanche of orders from Everbright Securities, said a report by Associated Press on Sunday.

According to the China Securities Regulatory Commission (CSRC) in a statement, its investigators concluded the brokerage's software design flaws had failed to limit orders and prices, and there was no evidence suggesting human error.

Everbright's orders had caused trading volume to rise over 50 percent above Thursday's level. Its orders totalled 23.4 billion yuan (US$3.7 billion), with completed transactions nearly 7.3 billion yuan (US$1.2 billion).

Prices of major companies such as PetroChina, Sinopec, ICBC, Bank of China and other blue chips shot up to their maximum daily limit of 10 percent before dropping back.

The CSRC said there were obvious faults in internal control and systems, and Everbright would be severely dealt according to the law after investigations are complete. The authorities noted this was the country's first such incident, and added while an extremely isolated case it exposed gaps in the system.

Just last year on the New York Stock Exchange, a botched software upgrade by brokerage Knight Capital Group triggered a flood of orders which resulted in a US$440 million loss.

 

Topics: Software, Banking, China

About

Loves caption contests, leisurely strolls along supermarket aisles and watching How It's Made. Ryan has covered finance, politics, tech and sports for TV, radio and print. He is also co-author of best seller "Profit from the Panic". Ryan is an editor at ZDNet's Asia/Singapore office.

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