China's securities company buy into future brokers, awaits upcoming reform
29/10/2007 16:16
Half of China's futures brokers have fallen under the control of
securities companies, as the country's financial institutions pave way for the
introduction of the long-awaited stock index futures, said the country's
securities regulator on Saturday. The proportion was 10 percent last year,
said Huang Yuncheng, deputy director of the futures department under the China
Securities Regulatory Commission (CSRC), at a forum on China's financial
derivatives. Securities companies were "chasing after the futures brokerage
resources in order to obtain the right to the upcoming stock index futures
trade", said Chen Nianbai, senior analyst with Guangfa Futures Brokerage Co,
Ltd. According to CSRC regulations, financial futures business should be
exclusively licensed to futures companies in the early stage of the futures
market, while non-futures companies are prohibited from conducting brokerage of
such business. But to satisfy the demand of securities dealers to participate
in the financial futures business and avoid consequential conflicts of interest,
the authorities permit securities firms to indirectly take part in financial
futures brokerage by holding stakes in futures
companies. Small-and-medium-sized futures companies often welcome the
acquisition as they need capital to meet the registered capital requirement to
qualify for financial futures trading. The registered capital of 43 futures
companies have reached 100 million yuan (US$13.37 million), double the 50
million minimum requirement for transaction settlement qualification, said
Huang. A total of 110 futures brokerage companies have applied to provide
financial futures business and 54 have been approved. CSRC chairman Shang
Fulin said on Saturday that the country had basically completed system and
technical preparations for the launch of its first stock index futures, but
final preparations would be made before the official introduction. Simulation
trading was started in October last year to test the trading system at the
Shanghai-based China Financial Futures Exchange (CFFE), which was inaugurated in
September 2006 to become the country's first financial derivatives
exchange.
Xinhua
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