SHANGHAI, Aug. 16 -- THE Shanghai Stock Exchange yesterday halted trading in warrants of China Merchants Bank three times, citing trade irregularities, amid signs of growing speculation in the infant derivative market.

The bourse found the irregularities in a Shenzhen-based outlet of United Securities Co and blocked two suspect warrants accounts, it said in a statement.

The accounts were suspected of manipulating the market and the Shanghai exchange has asked the China Securities Regulatory Commission to conduct a thorough investigation, the statement said.

Put warrants of China Merchants Bank were temporarily suspended from trading once in the morning and twice more in the afternoon, each time for 15 minutes. The warrants soared 242 percent to close yesterday at 0.50 yuan (6.6 US cents) apiece with a turnover rate of more than 1,110 percent.

The warrants will enable holders to sell shares of the bank to the lender's biggest shareholder China Merchants Steam Navigation Co at 5.45 yuan each between August 27 and August 31.

Shares of the lender finished yesterday at 36.26 yuan, making the put warrants worthless when they expire late this month.

"Risks are huge and investors are speculating they won't be the last one in the relay," said Wu Ke, a Zhongtian Investment Consulting Co. "It's wise to stay on the sidelines now if you don't want to lose money."

Chinese authorities initiated warrants in early 1990s but banned them a few years later because they had been used for speculation and caused significant market volatility.

The warrants were re-introduced in 2005 as part of a compensation package offered by controlling shareholders to investors in a program to make all shares at domestically listed firms tradable.

However, as supply largely trailed demand, trading irregularities occurred last year, prompting regulators to allow brokerages to issue warrants over firms whose shareholders have already launched the derivative.

Some traders attributed yesterday's jump to market anticipation that brokers may accelerate the scrapping of warrants they have created over the lender's shares towards the end of this month and thus reduce supply.

A total of 3.83 billion warrants of the bank created by brokers were in circulation by Tuesday, against 2.24 billion warrants issued by China Merchants Steam Navigation, according to exchange data.

"The brokers' move to abolish warrants will likely reduce market capitalization and reap speculative investment chances," said Fan Xiangpeng, a Sinolink Securities Co analyst.