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Stock re-lending program to include 19 more brokerages
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China’s securities regulator has expanded a pilot program that facilitates the ability of brokerages to lend stocks to clients for short selling as it pushes reforms in the securities sector.
The China Securities Regulatory Commission now allows a new group of 19 brokerages to participate in the program to borrow stocks and re-lend them to clients for short selling from today, the China Securities Finance Corp, a state-owned intermediary body that facilitates the trial, said in a statement on its website yesterday.
The CSRC also tripled the number of underlying shares for stock re-lending from the original 87 to 287, the total value of which accounts for 64 percent of the A-share market’s capitalization.
The expansion, which raises the total number of participants from 11 to 30, brings more small-cap stocks, including those traded on China’s Nasdaq-style ChiNext board, into the program as the CSRC strives to diversify portfolios for investors.
The changes came after China increased the pool of selected shares for margin trading and short selling from 494 to 700 earlier this month, easing concern the CSRC may stop innovation after Everbright Securities Co stirred the Shanghai stock market last month with a deluge of erroneous orders.
“The move helps improve the profitability of securities houses and indicates the promotion of innovation is continuing even after the Everbright incident,” said Hua Sha, analyst at Huaxia Securities.
Data from Orient Securities show the aggregate balance of margin trading and short selling accounts at listed brokerages at the end of June was 109.7 billion yuan (US$18 billion), a 134 percent surge from a year earlier.
Income from margin trading and short selling totaled 3.4 billion yuan in the first half, accounting for 9 percent of revenue at listed brokerages. They expect the revenue to drive their profits.
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