Study On Securities Error Trade Cancellation System

Securities error trade means the completed securities transactions which is significantly incorrect in price or other trade parameters,which does not correctly match the trading entity's trading intentions,caused by the behavior of market participants or trading system malfunctions,and having material adverse effect on the formation of securities prices.The securities error trade cancellation system is a system dealing with these errors by cancelling the trades according to the exchange-made rules and procedures.This paper comprises four major sections.The introductory section of this paper introduces the cases of error trade that have occurred in our country,including the re-examination of the “Guangda Fat Finger Incident” from the perspective of error trades.In this part of the paper introduced two cases of securities transactions which has been cancelled in China,one of which is caused by an error trade,nevertheless our laws or the rules of the exchange did not establish an error trade cancellation system,which proves a dislocation of law and practice.In the first section,according to the trading rules of foreign exchanges and the existing research reports,by summing up and analyzing error trade cancellation systems in foreign jurisdictions,the connotation and characteristics of the concept of error trade has been defined in this part.To distinguish against the concept of the existing “abnormal trading situations” system,this part also compared and summarized the concepts and characteristics between the two systems.This paper is of the view that the two systems are to be distinguished by the occurrence of situations,dealing measures and most importantly purposes of the two systems.Therefore,these two concepts and systems are not to be confused.The core of the second section of this article lies in the legal responsibility of the cancellation of the error trade.This section discusses the nature of the cancellation of the error trades,depending on the different nature of the cancellation system is based(which may be the intention of the parties to the transaction,or the rules of self-discipline given the authority)can be classified as "by virtue of consent" and "ex officio".On the basis of the analysis of the cancellation natures,this chapter systematically analyzes the legal liability of "transaction act" and "cancellation act" throughout the error trade process.This paper argues that for securities companies' erroneous transactions,they may assume liability for breach of contract based on strict liability,tort liability to other market participants,and other administrative consequences and other consequences under administrative supervision.It is possible for the securities exchanges to take the breach of contract due to any breach of the agreed responsibilities,and it may be responsible for breach of contract to the market subject based on strict liability.However,the exchanges' tort liability to other non-transaction counterparty market entities usually cannot be established.For the “ex officio” cancellation by the exchange in respect of the relevant error trades,the exchange,both in theory and in our existing cases,would be protected by the "goodwill supervision exemption" principle.The third chapter of this paper mainly discusses the question of the construction of the error trade cancellation system in our country.This section points out that the abnormal situation system of our country cannot replace the error trade cancellation system,but it has a positive effect on reducing the influence of the error information in the market.It should make a good connection with the cancellation system in the process of the construction of the error trade cancellation system.The end of this section has given some concrete suggestions on the construction of the error trade cancellation system,including the error information reporting system,timeliness of the procedure and construct the error trade prevention measures.