China sets securities companies' threshold
By Zhang Liuhao |
January 23, 2010, Saturday
|
Print Edition
Print Edition
CHINA yesterday set up the asset threshold for securities companies entering the trial business of margin trading and short selling.
Brokerages must have more than 5 billion yuan (US$732 million) in net assets over the six months before they apply for the business, according to the guidelines of the pilot program of margin trading and short selling released by China Securities Regulatory Commission yesterday.
Applicant brokerages are also required to be rated as A class in the latest assessment, said the guidelines.
The commission required qualified securities firms to have finished the development of a trading system for the business, expected to be launched soon, and passed tests by the clearing company and exchanges.
The regulator also said it would gradually relax the regulations and expand the program after the first batch of firms succeed in the test run.
The watchdog reminded selected firms to choose clients carefully.
Margin trading lets brokers fund stock purchases by individual investors. Short selling allows retail investors to sell borrowed securities with the aim of buying them back later at lower prices to profit from the difference.
They are expected to further shore up liquidity and allow investors to profit by betting on a market's drop.
The central government has also approved the introduction of stock-index futures, a long-awaited tool for investors to hedge market risks.
Brokerages must have more than 5 billion yuan (US$732 million) in net assets over the six months before they apply for the business, according to the guidelines of the pilot program of margin trading and short selling released by China Securities Regulatory Commission yesterday.
Applicant brokerages are also required to be rated as A class in the latest assessment, said the guidelines.
The commission required qualified securities firms to have finished the development of a trading system for the business, expected to be launched soon, and passed tests by the clearing company and exchanges.
The regulator also said it would gradually relax the regulations and expand the program after the first batch of firms succeed in the test run.
The watchdog reminded selected firms to choose clients carefully.
Margin trading lets brokers fund stock purchases by individual investors. Short selling allows retail investors to sell borrowed securities with the aim of buying them back later at lower prices to profit from the difference.
They are expected to further shore up liquidity and allow investors to profit by betting on a market's drop.
The central government has also approved the introduction of stock-index futures, a long-awaited tool for investors to hedge market risks.
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