Center
'Revolutionary change' ahead for domestic stock market
By Li Xiaowei (China Daily)
Updated: 2006-08-03 10:48
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"In the mid to long term, the launch of stock index futures will not affect the spot stock index, but in the short term the launch will have an impact," said Tan.
Officials have confirmed reports that futures brokerage companies are to take over the majority of the broking business for stock index futures contracts.
To become a full clearing member of the proposed futures exchange, a company must have a minimum registered capital of 100 million yuan (US$12.5 million).
To conduct broking for clients, securities firms need to either buy into a futures company or apply to become an introducing broker in partnership with a futures firm.
The introduction of stock index futures is expected to lead to the merging of securities firms and futures companies, said industry insiders.
"The introduction of index futures contracts will considerably increase mergers and acquisitions among securities firms and futures companies. Talks are now being held between securities firms and futures companies concerning acquisition and integration," said Dang Jian, president of the Shanghai CIFCO Futures Brokerage Co.
In the latest development, Shanghai-based Everbright Securities Co signed an agreement to acquire a controlling interest in Shanghai Nandu Futures Brokerage Co, the China Securities News reported yesterday, quoting unnamed Everbright officials.
The Everbright officials said that, if allowed by regulatory authorities, they would like to increase their holding in Nandu and eventually make the company wholly owned.
Most other securities firms identify with Everbright's strategy, as sharing a client base with a futures company that is not wholly owned is considered risky.
Stock market sources expect stock index futures trading to generate a turnover twice that of regular stocks potentially as much as 8 trillion yuan (US$1 trillion). Given that commission fees would be charged at 1/10,000th of the transaction value, trading could produce as much as 800 million yuan (US$100 million) for brokers.
The stock index futures market is initially likely to attract institutional investors such as mutual funds, social security funds, insurance companies and qualified foreign institutional investors, who would use the instrument for hedging and profit-making purposes.
Margin trading, which allows financial institutions to lend securities or money to investors, will enable short selling of shares by individual investors for profit, said analysts.
Officials have confirmed reports that futures brokerage companies are to take over the majority of the broking business for stock index futures contracts.
To become a full clearing member of the proposed futures exchange, a company must have a minimum registered capital of 100 million yuan (US$12.5 million).
To conduct broking for clients, securities firms need to either buy into a futures company or apply to become an introducing broker in partnership with a futures firm.
The introduction of stock index futures is expected to lead to the merging of securities firms and futures companies, said industry insiders.
"The introduction of index futures contracts will considerably increase mergers and acquisitions among securities firms and futures companies. Talks are now being held between securities firms and futures companies concerning acquisition and integration," said Dang Jian, president of the Shanghai CIFCO Futures Brokerage Co.
In the latest development, Shanghai-based Everbright Securities Co signed an agreement to acquire a controlling interest in Shanghai Nandu Futures Brokerage Co, the China Securities News reported yesterday, quoting unnamed Everbright officials.
The Everbright officials said that, if allowed by regulatory authorities, they would like to increase their holding in Nandu and eventually make the company wholly owned.
Most other securities firms identify with Everbright's strategy, as sharing a client base with a futures company that is not wholly owned is considered risky.
Stock market sources expect stock index futures trading to generate a turnover twice that of regular stocks potentially as much as 8 trillion yuan (US$1 trillion). Given that commission fees would be charged at 1/10,000th of the transaction value, trading could produce as much as 800 million yuan (US$100 million) for brokers.
The stock index futures market is initially likely to attract institutional investors such as mutual funds, social security funds, insurance companies and qualified foreign institutional investors, who would use the instrument for hedging and profit-making purposes.
Margin trading, which allows financial institutions to lend securities or money to investors, will enable short selling of shares by individual investors for profit, said analysts.