Net income from sales of securities contributed almost 50 percent of the brokerage firms' main business income, which rose to 75.92 billion yuan in 2013 from 2012's 50.41 billion yuan, the association said.

Meanwhile, net income of the underwriting and sponsorship business dropped to 12.86 billion yuan last year from 17.74 billion yuan in 2012, influenced by the whole-year suspension of the issuing of new initial public offerings.

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Internet finance transforms China's financial landscape

According to the data, the largest part of securities companies' profits still came from providing the agency services of trading stocks for individual and institutional investors, which rely on the activity level of the whole securities market.

However, as the competition between securities companies becomes fiercer, commission fees of the brokerage services are dropping, consequently squeezing their business profit margins.

For example, in order to attract more investors to open securities accounts online, Huatai Securities reduced its commission rate to 0.03 percent.

Currently, the 0.03 percent commission rate is common in Beijing, Shanghai and Shenzhen, where securities companies have many branch offices and large groups of clients. Before 2003, the commission rate was as high as 3 percent.

Once the new model of online brokerage services is expanded among securities companies, the level of commission fees is expected to decline further, with a "zero commission fee era" possibly starting later this year, putting big pressure on small and medium-sized securities companies, said a research note from Haitong Securities.

Wang Mingde, a researcher at Dongxing Securities, said the fast development of online brokerage services is an unavoidable challenge to the traditional business model for securities companies, pushing them to promote varied and customized services based on expanding business scale.

Under such pressure, securities companies that lack innovative spirit face the risk of being purchased by other financial institutions or Internet giants, Wang said.

On Monday, Founder Securities Co Ltd announced the audit and asset evaluation work for purchasing 100 percent of the shares of China Minzu Securities Co Ltd had been completed. After closing the deal, China Minzu Securities will become a wholly owned subsidiary of Founder Securities.

Zhao Dajian, chairman of China Minzu Securities said the merger will be a beginning of the "JPMorgan era" for China's securities industry, in that the new company is aiming to develop into a large and comprehensive financial group following the example of US financial giant JPMorgan Chase & Co.

Hongyuan Securities Co Ltd announced in November the start of a merger and reorganization process with Shenyin & Wanguo Securities Co Ltd. After the deal is finalized, it is expected to become the fourth-largest securities company in China with 82.94 billion yuan in total assets. Its annual operations revenue is likely to amount to more than 7 billion yuan while net profit is expected to be 2.1 billion yuan.

Liu Xiaoyong, an analyst at Shanxi Securities, said: "A new wave of consolidation will surge in the securities industry, starting with the above two merger cases."

Securities companies will no longer rely on earning commission fees through acting sales of securities but will focus more on strengthening their own customer network based on value-added services, according to Liu.