Chinese Regulators Blame Computer for Stock Frenzy
BEIJING -- A trading frenzy that caused Chinese stock prices to swing wildly last week was caused by a design flaw in a brokerage's computer, the market regulator said Sunday.
The avalanche of orders Friday from Everbright Securities Ltd. caused China's main market index to surge nearly 6% in 3 minutes before it dropped back. It ended the day down 0.6%.
The China Securities Regulatory Commission said its investigators concluded the buying frenzy was not the result of human error. It said Everbright's computer system had design flaws in systems that should limit orders and prices.
A statement on the agency's website gave no indication whether Everbright might face penalties.Everbright's orders caused trading volume to spike up more than 50% above Thursday's level. Prices of major companies such as PetroChina Ltd. (PTR) and state-owned banks surged by their maximum daily limit of 10% before falling back. Everbright's orders totaled 23.4 billion yuan ($3.7 billion), according to the China Securities Regulatory Commission. It said completed transactions were almost 7.3 billion yuan ($1.2 billion). The state-run China News Service said Friday that Everbright had asked to cancel the trades. But the Shanghai Stock Exchange said on its website that any transactions that had been completed would be cleared normally.
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