Fee cut and margin trading relaxed to save the market

An investor is checking prices of shares at a stock brokerage house in Nanjing city, East China's Jiangsu province, June 29, 2015.[Photo/IC]

China Securities Regulatory Commission (CSRC) announced a string of supportive policies, including a 30-percent transaction fee cut and relaxation on margin trading rules, as fears grow for a market plunge.

The amended rules on margin trading, whose draft were scheduled to be on public consultation till July 11, were released on Wednesday evening "in haste for special circumstances", said the securities watchdog on its official microblog weibo.

Market volatility has increased over the past two weeks as investors diverge on whether A-share's year-long bull was peaked.

The benchmark Shanghai Composite Index sank 5.2 percent to close at 4,053.7 on Wednesday, following its biggest swing since 1992 of 432 points.

Additional guaranty through discussion

Brokerages and margin investors can decide through discussion on when and how much percentage of additional guaranty should be put instead of compulsory sell-off, according to the amendment.

The previous rule stipulated that investors should make additional guaranty in two trading days if the ratio of capital they borrowed from brokerages reaches the 130 percent of warning level.

Brokerages will be able to extend contracts with their clients as long as the maximum term is under 6 months, the amendment said.

In addition, individual investors who have a margin trading account with securities asset below 500,000 yuan ($82,000) are allowed to continue their margin trades.

Xiao Gang, chairman of the CSRC, signed off the revised rules on Wednesday, which are effective immediately.

Brokerages allowed to issue bonds

The securities watchdog on Wednesday also announced allowing brokerages to issue bonds and explore securitization of margin trading business to widen their funding channels.

All brokerages are now allowed to issue short-term corporate bonds via stock exchanges and private equity trading systems between institutions, as previous trial among 20 brokerages proved a success, said Zhang Xiaojun, spokesman of the CSRC, in a separate announcement.

Brokerages and subsidiaries of fund management companies are also allowed to explore securitization of the right derived from their margin trading businesses, according to the announcement.