Brokerages to get a boost over securities

Chinese financial authorities plan to relax supervision over the operation of securities by introducing a "negative list" into the industry, China Securities Journal reported on Thursday.

Draft rules have been introduced that aim to push forward innovation by brokerages, CSJ reported. According to the draft, the authority will issue a "negative list", which clarifies which are "shouldn't do" businesses and enables the brokerages to develop any kind of business that is not included in the list.

Meanwhile, the authorities aim to reform the license management system, lower the threshold for access and support financial organizations adopting equity incentives for senior executives and key personnel.

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"The authority expressed a very active attitude towards brokerage innovation through this draft. The introduction of a negative list was not expected by analysts," Shenzhen based Zhongshan Securities said in a report on Thursday.

According to the draft, stockbrokers, fund management companies, futures companies and investment consulting companies will all be allowed to apply for licenses.

Meanwhile, it calls for the setting up of an open and competitive industry landscape by lowering the threshold for institutions initiating securities operations.

Private capital and professional personnel will be encouraged to set up institutions to operate securities, according to the rules. Private fund managers are encouraged to apply for licenses to conduct public fund businesses.

"For a long time, license management and price protection have allowed monopolized benefits for financial institutions in China, leading to a lack of innovation in this industry," said Li Jiange, vice-chairman of State-run investment company Central Huijin, at a forum.

"But as we push forward competition and weaken the barrier caused by licensing, other factors including scale and channels, risk management ability, and adapting to markets will play bigger roles in deciding the competitiveness of an institution," he added.

Emphasizing the need to let the market play a decisive role, China has been working on lowering thresholds in the nation's financial industry. Earlier this month, the China Banking Regulatory Commission granted licenses to 10 companies to enable them to jointly set up five private banks in China.

On the other hand, the Chinese authorities have been seeking to bolster the role of institutional investors in the country's capital markets. The China Securities Regulatory Commission last year lowered the entry threshold for private fund mangers entering the mutual fund business.

Private equity and venture capital firms were also added as eligible participants after the regulator received feedback on the earlier version of the rules.

China's stock market has been suffering from concerns over falling economic growth and a weakening yuan. The benchmark Shanghai Composite Index dropped by 0.83 percent to 2046.6 at the close on Thursday, marking the biggest slump in a week.