BEIJING - China Securities Regulatory Commission (CSRC) on Tuesday gave the green light to five securities companies to participate in the pilot program of margin trading and short selling as part of the efforts to expand the business to more qualified brokerages.

Shenyin & Wanguo Securities, Orient Securities, China Merchant Securities, Huatai Securities and China Galaxy Securities are the companies that have got the securities regulator's nod. All of them satisfy the regulatory requirement of having at least 5 billion yuan in net assets and have completed the test runs of the trading network to undertake the business, according to the regulator.

In an effort to allow more second- and third-tier brokerages to participate in the new business, the regulator also lowered the minimum threshold for them to 3 billion yuan in net assets in the past six months and a B-class rating.

Fifteen securities firms including Guoyuan Securities and Qilu Securities have been selected as the new candidates for the trial trading.

Margin trading and short selling, which allows investors to borrow money to buy securities or borrow securities to sell, made its debut on March 31. Six securities firms including CITIC Securities were approved as the first batch of brokerages to participate in the pilot program.

According to the regulator, the business turnover has reached 3.05 billion yuan as of May 31 with margin trading accounting for 92.7 percent of the total.

"The results are within our expectations. The business has been growing steadily and the number of accounts has also been increasing since the start of business in March," a CSRC official said at a press briefing.

The official said the stock exchanges in Shanghai and Shenzhen are studying the possibility of expanding the number of stocks for margin trading and short selling. The regulator, however, has no plan to loosen the requirements for investors due to risk control concerns.

The minimum trading margin was set at 60 percent for margin trading and at 70 percent for short selling. The regulator set the interest rate for margin trading at 7.86 percent and the rate of stock borrowing fee at 9.86 percent.

Liao Qing, an analyst at Haitong Securities, said margin trading and short selling business has limited impact on the A-share market given its relatively small turnover.

China Daily

(China Daily 06/09/2010 page13)