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Securities company buy into future brokers, awaits upcoming reform
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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 News Agency October 29, 2007)

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