China plans new stock trading rules after Everbright scandal
BEIJING, Sept 6
BEIJING, Sept 6 (Reuters) - China's stock regulator said on Friday it will unveil new rules to tighten oversight of stock and futures dealings, in a response to a recent trading scandal at brokerage Everbright Securities.
China's stock regulator last month fined Everbright 523 million yuan ($85.5 million) and barred its former president from the industry for life, after uncovering evidence of insider trading and other irregularities.
The new rules will clearly define abnormal dealings in stocks and futures, improve trading systems and tighten internal risk controls, a spokesman for the China Securities Regulatory Commission (CSRC) told reporters at a briefing.
The CSRC also said the new regulations would help institute a mechanism of stopping abnormal transactions and enhancing information disclosure to help minimize potential risks.
He gives no further details on the proposed rules.
The problems at Shanghai-based Everbright date back to Aug. 16, when a glitch with its order execution system sent 26,082 erroneous "buy" orders directly to the Shanghai Stock Exchange during a two-minute period, leading to a massive but short-lived jump in the country's main stock index.
Everbright reacted to the errant trades by building up huge short positions in index futures and exchange-traded funds, before it disclosed details of the glitch - the revelation of which caused indexes to collapse back into negative territory.
The strategy helped Everbright hedge its losses, but investors who followed Everbright's lead into banking shares lost heavily in the aftermath. It was also illegal, regulators have said.
Industry experts said Everbright's trading error exposed shortcomings in China's trading systems and their oversight, which could prompt local securities firms to review their practices and may result in greater regulatory supervision.
The CSRC had earlier said it would suspend approvals of any new businesses by Everbright and investors who suffered losses from the trading glitch could take the brokerage to court and demand compensation.
The regulator also widened its probe of stock trading systems to all brokerages following its investigation into Everbright.
The company has been told to suspend lead underwriting any new debt financing instruments of non-financial enterprises in the country's interbank bond market. (Reporting by Aileen Wang and Kevin Yao; Editing by David Holmes)
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