Everbright Faces Further Sanctions Over Shanghai Crash

Securities And Exchange Commission SECBy U.S. Government [Public domain], via Wikimedia Commons

Everbright Faces Further Sanctions Over Shanghai Crash

Everbright Securities Co Ltd (SHA:601788), the Chinese brokerage house responsible for the inverted Flash Crash last week, continues to struggle as a government crackdown persists. After sending an erroneous multi-billion dollar buy order to the market last week, the firm accidentally mispriced a 10 billion yuan sale in government bonds yesterday. Since then the firm has been “suspended” and its shares in Shanghai yesterday traded the full 10% down allowed by law.

All signs are pointing to a swift and harsh punishment doled out by authorities for Everbright’s sloppy business practices. Market confidence has been a plaguing issue in mainland China as over 2 million trading accounts have been closed and the Shanghai Composite has dropped over 40% since 2009.

“It wouldn’t be surprising, as market participants and investors eagerly await, if the regulators hand down a harsh penalty and hefty fines to ensure that similar incidents will not happen again,” said Hubert Tse, a Shanghai-based partner at the law firm Boss & Young who’s not involved in the case.

In addition to fines and a tarnished image, Everbright also faces a potential loss of 300-400 million yuan from the erroneous buy orders that were executed.

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