Shanghai “Flash rally” on Friday could cost brokerage $65m 19-August-2013 Everbright Securities’ fat finger trade in Shanghai on Friday could cost the Chinese brokerage up to Rmb400m ($65.4m), or up to 2 per cent of its equity base, according to estimates by Citi analysts. Everbright Securities sparked an over 5 per cent flash rally last Friday when it accidentally put through an Rmb7bn trade by its prop trading desk. Based on that size trade and an estimated 5 per cent trading loss base on the day’s market volatility, Citi’s Paddy Ran says the brokerage could have lost Rmb300-400m, up to 20 per cent of its pre-tax profit for 2012. For China Everbright, a Hong Kong-listed group that holds 33 per cent of Everbright, that could mean it shares the loss to the tune of Rmb90-102m, around 6-7 per cent of pre-tax profit in 2012. China Everbright lost 5.5 per cent on Friday and is down a further 1.1 per cent today. Everbright Securities in Shanghai is suspended today. On Sunday, Chinese regulators confirmed that the error was due to trading systems, rather than human error. In a statement, the China Securities Regulatory Commission said: No human operation error is found in the verification so far but there is obvious flaw with the internal control of the trading in Everbright Securities and many problems in its information system management. Shanghai Branch of CSRC decided to take administrative regulatory measures to suspend its business, require the company to correct and change and launch internal accountability investigation. Meanwhile, CSRC has filed an investigation into Everbright Securities. Severe punishment will be made according to the investigation results and will be announced to the public in time.
Posted on: Mon, 19 Aug 2013 07:39:41 +0000
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