The Shanghai Stock Exchange and the China Financial Futures Exchange disputed claims by an ex-trader at Everbright Securities in a lawsuit contesting the trader's punishment for insider trading.
The Beijing First Intermediate Court on Tuesday agreed to accept a lawsuit filed against the China Securities Regulatory Commission (CSRC) by Yang Jianbo, the former general manager of a high-frequency trading unit at Everbright. The CSRC banned Yang and some colleagues from the securities industry for life and fined them each 600,000 yuan ($98,700) over trades related to a computer malfunction last August.
"Yang Jianbo's comments about this exchange have many inaccuracies," the Shanghai Stock Exchange said in a statement in its Sina Weibo microblog late on Wednesday. It said that it would deliver supporting documents and evidence to the relevant authorities.
The China Financial Futures Exchange said Yang's comments were "distorted and untrue," the official Xinhua news agency reported on Thursday.
The CSRC has direct control over both exchanges. Neither exchange specified which of Yang's claims it believes are inaccurate.
The CSRC found that after a computer malfunction during morning trade on Aug. 16, which caused Everbright to take a 7.27 billion yuan ($1.2 billion) long position in a popular exchange-traded fund, Yang and his colleagues committed insider trading by partially unwinding that position in afternoon trade without properly disclosing the original trading error.
Yang's lawsuit claims, among other things, that Everbright communicated with CSRC and exchange officials before initiating the hedging transactions and that they did not raise objections to the actions later determined to be insider trading.
Yang also claims that the existence of a trading error doesn't qualify as inside information, and that subsequent trades designed to unwind them were in line with the unit's normal hedging strategy, not an exceptional response to the mistaken orders.
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