China to allow brokerages to offer margin trading

The change is seen as a step to stimulating China's capital markets.

SHANGHAI - China's securities regulator has announced it will allow some stock brokerages to offer margin trading services to clients on a trial basis starting on August 1.

Trading will initially be confined to a small group of qualified brokerages and selected stocks, to avoid the possibility of destabilising the bourses, official media said.

Authorities see margin trading, which lets investors buy and sell with money and stocks borrowed from brokerages, as a step in stimulating and deepening China's capital markets.

"Margin trading will not only provide investors with a new trading tool, it will also help to change the one-directional nature of the markets, and reduce risks for investors," the official China Securities Journal quoted a spokesman for the China Securities Regulatory Commission (CSRC) as saying.

Brokerages with net capital of at least 1.2 billion yuan ($246 million) over the past six months will be allowed to offer the services, and investors must provide deposits as collateral, the CSRC said in its statement.

Qualified securities houses must have been in the brokerage business for three years and have effective risk management, it added.

- REUTERS