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Margin trading licenses on cards

By Samuel Shen And Jason Subler (China Daily)
Updated: 2010-03-02 09:45

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SHANGHAI - China will grant licenses for margin trading and short selling to five to seven brokerages later this month, in a sign that the pilot program is moving forward smoothly, media reported on Monday.

About 11 brokerages are expected to compete for the licenses, the China Securities Journal cited unnamed industry sources as saying, adding that the winners will be announced around March 18-20.

Margin trading licenses on cards

An investor at a securities firm in Shanghai. The program will boost business for brokerages and provide investors with hedging tools.[China Daily]

The State Council gave the green light for the pilot scheme in margin trading and short selling in January, and the stock regulator later issued detailed guidelines on capital requirements and other rules.

Still, no formal launch date has been announced for either that program or for stock index futures, which are also due to begin sometime soon. Investors are already able to apply for accounts to trade in stock index futures.

The brokerages competing for the margin trading and short selling licenses include Citic Securities Co, Haitong Securities Co, Everbright Securities Co and China Merchants Securities Co, the China Securities Journal reported in January.

Margin trading allows investors to buy shares using borrowed money, and short selling allows investors to sell borrowed stocks in the hope of buying them back later at a lower price to profit from the share decline.

Together, the market reforms are expected to bolster business for securities brokerages and also to provide investors with hedging tools, improve market liquidity and spur the development of new products.

Reuters