Futures broker expected to mark restart of mainland IPO market

Beijing will give priority to the first share listing application from a home-grown futures brokerage when it reopens the initial public offering market, in a further sign of the regulators' determination to bolster the market.

Yongan Futures is likely to secure the distinction of becoming the country's first listed futures brokerage with the support and backing of Zhu Congjiu, a vice-governor of Zhejiang province and a former senior official at the securities regulator.

Initial public offerings have been suspended as the regulator avoids allowing fresh equity inflows so as to bolster the weak stock market.

According to two people close to the regulator, the China Securities Regulatory Commission has decided to soon approve several listing applications by futures firms to enable them to raise capital and quicken their expansion.

The decision was in line with a consensus among top securities officials, who are now fully acknowledging the positive role of futures trading, the people said.

The change of heart comes after regulators were previously reluctant to develop the market because of concerns that it might be undermined by rampant speculation.

Instead, against a background of breakneck economic growth and increasing demand for commodities, regulators turned their attention to liberalising the derivatives market, hoping that this would help the country gain global pricing power over major raw materials such as copper.

It was not until late 2011, when reform-minded Guo Shuqing became the chairman of the commission, that the regulator decided to turn its attention to developing the futures market.

"A listing by a futures brokerage is a symbolic move, but it could be a prelude to major changes on the market," said He Fuqiang, a director at Beijing ZHY Money & Bond Market Investment Consulting Centre.

"At the same time, fundraisings by futures brokerages can help them get stronger while supporting the growth of the market."

Several other big futures companies, including Ruida Futures, Luzheng Futures and Nanhua Futures, have also made plans to launch their initial share sales.

Annual turnover of futures trading climbed 24.4 per cent to 171 trillion yuan (HK$213 trillion) last year, and the regulatory commission accelerated preparations for the launches of bond and crude oil futures.