December 31, 2008 / 2:03 PM / 12 years ago

Easy come, easy go after gold glitch

BEIJING (Reuters) - A computer glitch at the Industrial and Commercial Bank of China gave gold traders a 23-minute bonanza that cost the bank dearly last week, sparking a debate on Monday as the bank reclaimed the windfall.

Several one-kilo gold bars are displayed inside a secured vault in Dubai April 20, 2006. REUTERS/Tamara Abdul Hadi

ICBC, the world’s biggest bank by market value, was left red-faced after its trading system went awry in the early hours of Friday, quoting a bid price for gold of 848 yuan per gram, nearly six times the going rate it had offered moment earlier.

Alert traders using the bank’s online trading platform pounced on the bank’s misfiring system and raked in easy profits, according to local media reports.

One lady in the western city of Xian made a tidy 126,540 yuan in a single minute, the Beijing Times said, estimating that the bank’s total losses ran to 10 million yuan ($1.46 million).

The golden opportunity lasted for 23 minutes, between 01:52 a.m. and 2:15 a.m. local time, Caijing Magazine reported.

ICBC spotted the error later in the day on Friday and froze all trades that had taken advantage of it, Caijing added.

On Saturday, the bank posted a statement on its website saying that prices on its gold trading system had “deviated seriously from the market price” for a short time.

It added that all sales and purchases executed during that window would be canceled in accordance with an agreement signed by users of the gold-trading platform.

“The gold trading system quickly returned to operating normally and ICBC is contacting related clients and explaining matters,” the statement concluded.

The question on Monday was whether the bank was in the right.

Zhang Zhifeng, a lawyer at the Lanpeng Law Firm, told the Beijing News that ICBC had no legal basis in seizing the money since the clients had simply sold at the price quoted by the bank and had not intentionally cheated it.

Law scholar Wang Weiguo disagreed, telling Fazhi Wanbao, a legal affairs newspaper, that the windfall constituted “unjust enrichment” for the traders and had to be returned to the bank.

($1=6.843 Yuan)

Reporting by Simon Rabinovitch, Editing by Jonathan Leff

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