Shanghai Composite Index Flash Rally Caused By Computer Glitch

The trading glitch that caused Chinese shares to fluctuate widely on Friday was due to design defects and in a mid-sized broker’s transaction system rather than human error, the China securities regulator said in a statement Sunday.

The checks show that the sizeable buy orders was from an automated account in Everbright Securities Co., the China Securities Regulatory Commission said.

“While the glitch didn’t stem from human error, there are shortcomings in Everbright’s internal controls and that many problems exist in its data systems and management,” a CSRC spokesman said.

The error resulted in inflated transactions totaling 23.4 billion yuan ($3.8 billion), while the actual transactions was CNY7.27 billion, CSRC said. It added that it will launch an official probe into Everbright Securities.

While there is currently ample liquidity in the market and risk controls are generally sound, “this is the first incident of its kind in China’s capital market and is an extreme, one-off event,” the spokesman said. “But it reveals problems that are enough to trigger heightened vigilance from the entire stocks and futures market sector.”


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu