Curriculum·R411 Building, Validating, and Operating Your Own Automation·about 32 min
Risk controls in the machine
By the end of this lesson you can
- →List the five machine-level limits and where each one must live
- →Explain why a limit in a policy document is not a limit in a system
- →Compute how far a documented limit was exceeded when it was not enforced in code
- →Bound the permission the system holds, independently of the limits it obeys
Senior · enrolled learners
This lesson opens with Everbright Securities, 16 August 2013.
- What happened
- On the morning of 16 August 2013 a fault in Everbright Securities' order execution system sent 26,082 erroneous buy orders directly to the Shanghai Stock Exchange over about two minutes. The orders totaled about RMB 23.4B, of which roughly RMB 7.27B executed. The Shanghai Composite Index rose 5.96 percent between 11:05 and 11:07 and the prices of the CSI 300, index exchange traded funds and stock index futures were all materially affected. The department's own daily limit for spot trading was RMB 80M. The China Securities Regulatory Commission subsequently confiscated RMB 87.2M of improper gain and imposed a fine of RMB 436M, a total of RMB 523M, and four senior executives including the president were barred from the market for life and fined RMB 600,000 each.
- The decision point
- The limit existed. It was RMB 80M, it was the department's own stated figure, and about RMB 7.27B traded against it in two minutes, which is roughly ninety times the permitted amount. The limit lived in a policy document and not in the order path, so nothing between the strategy and the exchange ever compared the two numbers. A limit a machine cannot enforce is a statement of intent, and per R403-06 that is an alert rather than a control.
- Recorded loss
- $1,200,000,000
What you will be able to answer
- →What are the five machine limits?
- →Where must each one live?
- →By how much was the documented limit exceeded?
- →What bounds the permission itself?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- http://english.sse.com.cn/news/newsrelease/c/4947481.shtml
- https://www.scmp.com/business/banking-finance/article/1300692/china-everbright-securities-fined-523m-yuan-stock-market
- https://www.cnbc.com/2013/08/22/china-vets-brokerages-computer-systems-after-38-billion-buy-error.html
- https://money.cnn.com/2013/08/22/investing/china-everbright-securities/index.html
Confidence medium·Volatility low·Reviewed 2026-08-07·Owner unassigned
Contested
Reported figures for the Everbright incident are consistent on the order count of 26,082, the roughly RMB 23.4B placed and RMB 7.27B executed, and the RMB 523M total penalty comprising RMB 87.2M confiscated and RMB 436M fined. The dollar equivalent in this lesson's metadata is an approximate conversion at 2013 rates and is indicative only. Accounts differ on the precise internal fault.
The regulator also found that the firm's subsequent hedging while in possession of knowledge of the error constituted insider trading, which is a separate matter from the control failure and is not the subject of this lesson.
R403-06 owns circuit breakers as thresholds a person sets. R404-04 owns order flags. F109-02 owns approvals and standing permissions. This lesson owns the enforcement point, being where in the path a limit has to sit. Keep the splits.