Everbright Securities head resigns amid probe

Trading of shares in company scheduled to resume on Friday

To nobody's surprise, Xu Minghao, president of the beleaguered China Everbright Securities Co Ltd, which roiled the nation's stock market last week with an erroneous 7.2 billion yuan ($1.17 billion) in buy orders, resigned on Thursday, leaving regulators with piles of questions to address.

In a statement to the Shanghai Stock Exchange, Everbright Securities said its board of directors accepted Xu's resignation, four days after regulators announced a probe into the company.

Chairman Yuan Changqing was named acting president.

"Xu's resignation was not a surprise because the incident caused a major market controversy," said Wang Jianhui, chief economist at Southwest Securities Co Ltd.

Trading of Everbright shares was suspended on Thursday afternoon and is scheduled to resume on Friday.

Xu joined Shanghai's research institute of structural reform in 1988. He began working at the Bank of Communications Ltd in 1991. He became secretary of the board of directors of Everbright Securities in 2000 and became a director in September 2002.

He assumed the position of president in 2005.

A source at Everbright Securities, who asked for anonymity for legal reasons, said the head of the compliance and risk control department will eventually take charge of the strategic investment department, which was ordered by the authorities to suspend operations from Aug 19 to Nov 18.

The market appeared to have regained its composure after the Everbright incident.

The Shanghai Composite Index eased a meager 0.28 percent to 2,067.12 on Thursday.

Media reports speculated that the China Securities Regulatory Commission had completed its investigation of the Everbright problem on Wednesday and would release a report within a week.

The incident benefited the shares of companies involved in Internet security.

Shenzhen-listed ZTE Corp jumped 5.45 percent in the morning, eventually closing 0.95 percent higher at 17.03 yuan.

Langchao Electronic Information Industry Co Ltd, which fell on Wednesday, gained about 3 percent in the morning.

Shanghai Mecrtsoft Technology Co Ltd, which supplied the trading system used at Everbright that's been implicated in the error, re-activated its website after a shutdown of almost a week. It said in a statement that it was "business as usual".

Design flaws in the Mecrtsoft trading system were said to have erroneously sent the buy order that touched off a mad scramble, pushing the benchmark Shanghai index up a whopping 5.6 percent in two minutes in morning trade, with the trading volume 80 percent above the 30-day average.

Everbright said in statement on Aug 16 that the error could have led to a trading loss of 194 million yuan.

The figure may change, the brokerage said two days later. The ultimate trading loss from the error could reach 400 million yuan, Paddy Ran, a Citigroup Inc analyst, wrote in a note last week.

A spokesman for the CSRC said on Wednesday night that the agency will scrutinize the security problems brought out by the program trading system.

While dealing with the Everbright incident, the commission will also investigate the trading systems used by other securities companies to avoid similar incidents.