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Regulation

Financial lawmaker calls on SFC to relax rules restricting Hong Kong stockbrokers

Christopher Cheung Wah-fung has asked the regulator to allow brokers to open online accounts for mainlanders and to conduct asset management business

PUBLISHED : Monday, 31 October, 2016, 5:10pm
UPDATED : Monday, 31 October, 2016, 11:22pm

A lawmaker has urged the financial regulator to make it easier for stockbrokers to open accounts online for mainland customers and to allow them to conduct asset management business, in a bid to help struggling industry players.

Christopher Cheung Wah-fung, legislator for the financial services sector, said the brokerage industry has faced the challenge of declining turnover as more players have joined the market.

“If Hong Kong brokers could open accounts for mainland customers via the internet, it would widen the customer pool for many local brokers,” Cheung said during a media lunch on Monday.

The number of stockbrokers trading in the Hong Kong stock market has risen to the highest level in 20 years, with 614 brokers now licensed to trade in the city’s bourse, compared with 604 in March, according to SFC data. In the 12 months to June, 119 new players were granted licences to begin operating in the city.

If Hong Kong brokers could open accounts for mainland customers via the internet, it would widen their customer pool
Christopher Cheung Wah-fung, lawmaker

Newcomers have been attracted by an improvement in market outlook last year when the Shanghai-Hong Kong Stock Connect programme led to a record HK$200 billion of shares changing hands on average every day during the month of April 2015. The average daily transactions have declined 66 per cent from that peak and were down 42 per cent in the first nine months of this year to HK$67.8 billion.

Cheung said he has negotiated with the Securities and Futures Commission, which has agreed in principle to relax the rule which currently restricts Hong Kong brokers to only opening accounts for mainlanders face to face. The reformed regulation, which does not yet have a launch date, would allow accounts to be opened online as long as the customer possessed an electronic permit from police on the mainland. Meanwhile, the Hong Kong broker would require an e-certificate from Hong Kong Post Office.

“This will help Hong Kong brokers to capture mainland customers and to provide them with Hong Kong stock research reports,” said Cheung, himself a veteran broker with more than 40 years of experience.

The eagerly-awaited Shenzhen-Hong Kong Stock Connect, due to commence in November, will generate more business and help boost market sentiment, he added. The new cross-border scheme will allow international investors to trade Shenzhen-listed stocks through Hong Kong based brokers, while mainland investors will be able to buy and sell Hong Kong stocks via mainland brokers.

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Cheung also called on the SFC to relax its rules to make it easier for stockbrokers to obtain licences to conduct asset management business. “This will allow brokers to introduce more different investment products for investors,” he said.

Cheung said he has also passed on brokers’ views on the controversial proposed listing reform, currently out for consultation until November 18.

He said most stockbrokers opposed the proposals to set up a Listing Reform Committee with equal representation from the SFC and HKEX which would approve complicated new listings applications.

The brokers, however, support the proposed establishment of a Listing Policy Committee to discuss changes to listing rules. But besides SFC and HKEX representatives, Cheung said this committee should include market participants and government officials.

“This would speed up new financial policies, such as launching the new market for technology companies to list here,” he said.

Cheung was first elected to the Legislative Council representing stockbrokers, futures traders and gold dealers in 2012. He regained his seat for another four-year term this year.

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