Shares bought in error to be withheld
Print Edition
China Everbright Securities said yesterday it will not trim its holding of shares bought through an erroneous transaction last week that resulted in the wildest swing on the Shanghai stock market in four years.
Everbright will withhold the shares until a disposal plan is reached, the broker said in a filing to the Shanghai Stock Exchange.
Design flaws in an Everbright trading system triggered a spate of buy orders that caused a sudden surge in shares late on Friday morning, with the benchmark composite index leaping 5.9 percent in two minutes before later falling back.
The erroneous orders totaled 23.4 billion yuan (US$3.8 billion), of which 7.27 billion yuan was actually transacted.
Everbright said it will be free to close out a large number of short positions in the stock-index futures market which it created following the erroneous buying of stocks, while any profits gained dealt with in accordance with the law.
Everbright has been banned from opening new stock-index futures positions since yesterday, the China Financial Futures Exchange said on Sunday. The securities regulator has also barred Everbright from proprietary business for three months and launched a formal investigation into the broker.
Trading of Everbright shares resumes today after it was suspended on Friday afternoon.
There were claims Everbright was guilty of market manipulation and insider trading as it opened 7,130 lots of short positions in the stock-index future market after the mistaken orders sparked a mad rally.
“It was more like a market manipulation as Everbright intended to make profits through arbitrage trading in the stock-index future market after lifting the share prices,” said Pi Haizhou, an independent columnist.
Meanwhile, Everbright made another mistake yesterday by selling bonds at a lower price due to human error.
The broker sold a face value of 10 million yuan of government bonds at a yield of 4.20 percent, 25 basis points higher than the yield on the previous trading day, the broker said in a statement on its website.
The broker said it was an input error.
It is communicating with the counterparty on the deal, according to the broker.
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