Aug 16, 2013 07:05 PM

Surprise A-Share Surge Followed Everbright Trading Error

(Beijing) – Everbright Securities suspended trading of its shares on Friday afternoon to investigate transaction mistakes which are widely viewed as the cause of a dramatic rally on the A-share market in the morning. 

Roughly at 11:05 a.m., the Shanghai stock exchange's benchmark index surged to 2198.85 points, led by soaring share prices of large financial institutions including banks, securities firms and insurance companies.

The stock index saw a 5.62 percent increase from its closing level the previous day.

Speculation about what caused the fluctuations centered on Everbright Securities. According to local media reports, the company disrupted the market with erroneous transactions involving 7 billion yuan of its own capital.

An executive of the securities firm denied the allegation and said its internal control system would not have allowed such a mistake.

The firm then suspended trading of its shares on the Shanghai Stock Exchange. In an announcement that followed, it stated, "Everbright Securities strategic investment department's proprietary trading unit had problems in the operation of its independent arbitrage system."

The firm has started investigating the matter, and its other operations are running normally, the announcement said.

Yang Jianbo is the head of Everbright Securities' strategic investment department, a source close to the brokerage firm said. Yang declined to comment. 

The source said that the surge of stock prices was set in motion by unintended buy orders placed by the department's arbitrage system, which was the result of a trader's maloperation.

About 1 billion yuan of Everbright Securities' proprietary trading capital is at stake, the source said.

The Shanghai Stock Exchange has said that it will have all securities transactions today cleared and settled despite the price fluctuations.

It is unclear yet how much Everbright may lose.

The Shanghai Composite Index closed at 2068.45 points today, down 0.64 percent from the previous day.

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