The Shanghai Composite Index (SSE Composite Index) was unusually active on August 15th, gaining and losing percentages in seconds. The culprit behind the Chinese trading discrepancies is Everbright Securities Co. (601788), one of the largest securities brokerage by assets in China.

Sources state that a trader with Everbright placed an accidental order to buy 30 million lots (3 billion shares) instead of 30 million shares. This is also known as a “fat finger” trade, when someone presses the wrong key when inputting data. This transaction cost Everbright securities an extra 3 billion yuan, drew criticism from Chinese and American funds alike for “manipulating the market”, and quite possibly furthered the decline of the SSE Composite Index.

Traders following the accidental surge of the Chinese market paid a heavy price. Bloomberg News reported that “a trader with a Shanghai-based brokerage said his company, hoping to chase a short-term gain, increased its purchases of shares. The market was rife with speculation that the sudden surge was in response to incentives to be rolled out soon by the market regulator.”Chinese stock markets have been continuously slowing down from its 2009 high. It has already fallen 40 percent from August 2009, losing around ＄644 billion in market value. Coupled with the fact Chinese investors withdrew more than 2 million in equity trading accounts, the world’s second-largest economy has encountered quite some friction. Only Greece’s ASE Index has fallen more in terms of percentage.

“The timing was not good for trading errors in China,”Brian Jacobsen, who helps oversee ＄221.2 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said by phone yesterday, as reported by Bloomberg News. “There are already a lot of skeptics out there and an event like that can erode some people’s confidence.”The Shanghai Composite has lost 8.8 percent this year, despite a 9.8 percent gain in the MSCI All-Country World Index. Chinese stock accounts containing funds have dropped to 54.4 million from 57.3 million in June 2011, according to regulatory data compiled by Bloomberg.

Economic growth slowed for a second straight quarter to 7.5 percent in three months ending in June, extending the longest streak of expansion below 8 percent in at least two decades. The decreasing economic growth may be due to new policies enacted by the government.