China extends probe into brokerage IT after Everbright reports $85.5 million loss due to glitch

China extends probe into brokerage IT after Everbright reports $85.5 million loss due to glitch

China Everbright Securities lost $85.5 million due to a technical glitch in its order management system which flooded the market with erroneous buy orders and seriously disrupted trading in China last month.

The full extent of the losses were revealed in a statement filed to the Shanghai Stock Exchange. They are in addition to a fine of $86 million imposed by the country's securities regulators.

The erroneous order caused chaos in the Chinese securities market as the Shanghai Composite index surged nearly six per cent in seconds for no apparent reason.

The blame for the glitch was placed on Mercrtsoft, the company which supplied Everbright's order execution engine as a custom build. Mercrtsoft also supplies high frequency trading software to 17 other brokerages and four futures companies.

China's Securities Regulatory Commission (CSRC) has decided to widen its investigation of stock trading systems to all brokerages, amid concerns that local trading houses have been cutting spending on IT in the face of sluggish markets.

Last week, Everbright was ordered to suspend lead-underwriting of any new debt financing instruments in the interbank bond market after another trading mistake, attributed to human error, resulted in a trading loss of $32 million.

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