Name: Guiding Opinions on Margin Financing and Securities Lending Business of Securities Companies on a Trial Basis (关于开展证券公司融资融券业务试点工作的指导意见, the “Opinions”) and Approval Procedures for Margin Financing and Securities Lending Business of Securities Companies on a Trial Basis (证券公司开展融资融券业务试点审批, the “Approval Procedures”)
Issuing authority: China Securities Regulatory Commission (the “CSRC”)
Effective date: 22 January 2010
Subject: margin financing and securities lending
Following the State Council’s in-principle announcement published on 8 January 2010, the CSRC promulgated the detailed guiding opinions and approval procedures relating to the margin financing and securities lending businesses (the “Business”) for securities companies on a trial basis. Subsequent to that, on 27 January 2010, the Securities Association of China (“SAC”) promulgated detailed rules in respect of the professional assessment of plans of applicant securities companies for the Business. It is also reported that more than 10 securities companies have now successfully passed the testing of their trading and settlement system as organised by the stock exchanges (“Exchanges”) and the China Securities Depository and Clearing Corporation Limited (“CSDCC”). Moreover, these securities companies have agreed among themselves certain details in connection with the Business, e.g. interest rate for margin finance. With the final preparations being completed, it is clear that the CSRC is now ready to accept the first batch of applications from securities companies for conducting the Business on a pilot basis.
Highlights
- The first batch of applicant securities companies to conduct the Business must meet some stringent requirements in addition to the requirements set out in the Measures for the Administration of Margin Financing and Securities Lending Business of Securities Company on Trial Basis (“Trial Measures”), promulgated by the CSRC in 2006. These additional requirements include, amongst others:
- the applicant has a net capital of at least RMB5 billion (as compared to RMB1.2 billion set out in the Trial Measures) in each of the past six months;
- the applicant’s recent classification is at Grade A;
- the applicant’s trading and settlement system for the Business has passed the relevant testing organised by the Exchanges and the CSDCC; and
- the applicant’s plan for the Business has passed the professional assessment by the CSA.
- The CSRC intends to roll out the Business to other securities companies gradually. Subject to the review of the operation results of the first batch of pilot securities companies, it is specified in the Opinions that the CSRC may relax the above additional qualification requirements when considering applications in the future. The CSRC will also take into account the types of applicant securities companies and their physical locations when considering future applications.
- Securities companies classified at Grade B or above with sufficient net capital are encouraged to begin preparation for the Business in accordance with the Trial Measures. Detailed requirements will be promulgated by the CSRC separately.
Please contact Fang Jian (jian.fang@linklaters.com tel: +86 21 2891 1858) if you would like further details.
