Chinese state media today reported that the countrys securities regulator is about to allow brokerage firms to borrow money and stocks to re-lend to their clients for margin trading.
The China Securities Regulatory Commission sent notices to the Shenzen and Shanghai Stock Exchanges permitting them to kick off the re-lending business and will choose a right time to launch it, first on a trial basis, the official China Securities Journal said.
It was reported earlier this month that the regulator was planning to launch a pilot program to allow firms to participate margin trading and securities lending. China launched the practices in early 2010 but they remained limited with most securities companies unable to provide enough money and stocks to support their clients leverage trading and short sales. Hence margin financing and securities lending is limited in the Chinese market.
The new measures will allow brokerages to borrow money and stocks from banks, funds and insurers, and re-lend the money and stocks to the brokerages’ clients for the latter to conduct margin trading.
(JDC)