An Everbright Securities System Error Caused A Huge Spike On The Shanghai Stock Exchange Today

China’s Shanghai Composite index spiked about 5% today before crashing back down, thanks to a trading system glitch at brokerage Everbright Securities.

This morning’s two-minute spike was the index’s largest intraday gain since March 2009.

There was a 60% surge in trading volumes, with 12.1 billion Shanghai Composite shares changing hands, compared to only 6.7 billion at the same time yesterday, Bloomberg reports.

The Shanghai Stock Exchange investigated the spike, and issued a statement saying that its operations were normal.

Brokerage Everbright Securities admitted fault this afternoon, saying in a filing to the exchange that it was investigating the issue.

“This morning, Everbright Securities strategic investment department’s proprietary trading bureau had a problem when using its own arbitrage system,” the brokerage said, according to Reuters.

Via, here’s what happened:

“The index pivot point in Shanghai for this week was 2071,” Adam Maxey of advisory iQuant Systems explained.

“Having rallied from this point on Monday when that level was retested today the algo traders using their pattern recognition software may have attempted to replicate the earlier rally.

“The use of computers has made these moves more common. A similar pattern has occurred on the SP500 this week with 1695 being the pivot – this leaves 1660 open for a fall tonight.”

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