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Securities firms pass margin trading review

By Hao Yan (chinadaily.com.cn)
Updated: 2010-03-10 15:40

All eleven securities brokerages have passed an expert panel's evaluation for margin trading and short selling, and will be able to apply for a pilot program for the business as soon as next week, China Business News reported today.

The preliminary evaluation organized by the Securities Association of China (SAC) involved 21 experts, who reviewed the margin trading and short selling schemes of 11 securities brokerages competing for licenses to launch the business, including GF Securities, Citic Securities, Guotai Juan Secutiries, and Shenyin & Wanguo Securities.

Sources in the panel evaluation said that regulators are conducting on-site inspections of the securities brokerages this week. The brokerages could submit pilot program applications to China Securities Regulation Commission (CSRC) "as soon as next week", they told the newspaper.

Previously, regulators had said that a pilot program for margin trading and short selling could start as soon as the end of March, but industry insiders said it would be a challenging task to launch it even in early April, considering the time relevant procedures could take.

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