SHANGHAI, Aug 23 — Everbright Securities Co., the brokerage whose erroneous buy orders set off China’s biggest stock swings since 2009, said Xu Haoming resigned as president four days after regulators announced a probe into the company.

Shares in the brokerage were suspended from trading for the afternoon session in Shanghai and will resume today, the company said in a statement to the city’s stock exchange yesterday.

Chairman Yuan Changqing will become acting president as the company seeks to allay investors’ concern and stem an 18 per cent drop in its shares this week, after it made 23.4 billion yuan (RM12.7 billion) of erroneous buy orders on August 16. The China Securities Regulatory Commission banned Everbright from proprietary trading for three months following the error, which the watchdog called unprecedented.

“When something this serious happens, this makes perfect sense,” Cao Xuefeng, an analyst at Huaxi Securities Co. in Chengdu, said by phone yesterday. “Everbright needs to improve its internal controls. This is not entirely a bad thing as it will push the company and the industry to strengthen risk control.”

The company earlier this week suspended Yang Jianbo, who oversees its proprietary trading as head of global markets.

Everbright estimated that it lost 194 million yuan on the trades, based on Aug. 16 closing prices, and said the figure may change. The final trading loss from the error could reach 400 million yuan, Paddy Ran, a Citigroup Inc. analyst, wrote in a note last week.

Everbright shares fell 2.8 per cent to 9.98 yuan in the morning session in Shanghai before the suspension, declining for a third day.

Trading losses

Xu follows other executives at state-controlled Chinese companies in resigning after trading losses. Citic Pacific Ltd. Chairman Larry Yung stepped down after the company reported a currency-derivative loss of about HK$15 billion in October 2008, the biggest by a Chinese company. China Aviation Oil (Singapore) Corp.’s former head Chen Jiulin gave up his post in 2006 after a US$550 million trading loss that prompted the company to seek protection from creditors.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon kept his job after last year’s record US$6.2 billion trading loss that drew criticism from lawmakers and regulators. Shareholders in the largest US bank by assets rejected a proposal in May to split his roles after Dimon guided the bank through the global financial crisis and three straight years of record profit.

Everbright’s net income in the first half fell 2.2 per cent from a year earlier to 810.9 million yuan, China’s seventh- largest brokerage by market value said in a statement to the Shanghai stock exchange yesterday. Revenue rose 13 per cent to 2.39 billion yuan, it said. Larger competitor Haitong Securities Co. said yesterday first-half net income rose 32 per cent to 2.67 billion yuan.

Regulatory limit

The investigation into the trades is the CSRC’s second probe of Everbright this year, after the watchdog in June began scrutinizing the brokerage’s role in an initial public offering. That forced the company to delay a US$1.3 billion share sale.

Everbright’s strategic investment department, which oversees trades using the firm’s own money, made the incorrect buy orders on August 16, causing a 6 percentage-point swing in the Shanghai Composite Index.

Everbright may suffer financial damage as investors seek compensation for stock losses, and some clients could leave the company due to concerns over its internal controls, Li Cong, a Shanghai-based analyst at GF Securities Co., wrote in an August 19 note. Business expansion may be curbed due to penalties from the securities regulator, Li said.

The brokerage may be penalized because the value of equities, securities and derivatives held by its proprietary trading desk relative to net capital exceeded the regulatory limit of 100 per cent, Everbright said on August 18. The ratio was at 94.39 per cent at the end of June 2012, according to its first-half earnings statement last year. — Bloomberg