Analysts believe consolidation will be good for the market, which now has more than 400 industry players Sun Hung Kai Financial Group, one of Hong Kong's oldest and biggest financial services groups, has been in talks to acquire two stock-trading companies in a move that will further consolidate the local brokerage market. One of the deals - believed to be worth less than $10 million - will involve Yicko Securities, according to a source close to the firm. The group, which operates five branches locally and employs about 400 brokers, is also understood to be interested in buying another unidentified medium-sized local brokerage. Yicko made headlines earlier this month when its derivatives trading arm, Yicko Futures, was suspended from operations by the Securities and Futures Commission (SFC) after it failed to post margin on behalf of a client who incorrectly bet the market would fall. The incident did not affect Yicko Securities' operations as the two firms are run independently. Douglas Chen, head of corporate marketing at SHK Financial Group, confirmed that it was in talks to buy two brokerages. He declined to give more details about the proposed deals but did say the negotiations were at an advanced stage. 'We've already reached a few basic consensuses with the two firms,' Mr Chen said. 'We are still waiting for the completion of the due diligence process as well as checking whether the deals will be compatible with SFC regulations.' If the deals went through, it would be SHK's second acquisition of competitors in its core brokering business in less than five months. The group bought financial services institution Shun Loong Holdings from troubled businessman Chau Ching-ngai for $36.5 million in June. Mr Chen admitted that the group had been taking a more active expansion strategy because of the recent strength in the market. 'The market has been very active lately and from the Shun Loong deal we proved we have both the interest and financial ability to make acquisitions,' he said. 'Lately we have been approached by a number of brokerage houses about merger possibilities because of that.' Industry experts welcomed the news, with some suggesting that consolidation was badly needed in a market with more than 400 brokerages. Louis Wong Wai-kit, head of research at Phillip Securities, said more mergers would help create a healthier industry. 'There are only seven million people in Hong Kong, and 400 brokerages are just a bit too many,' he said. 'Mergers are quite common in countries like the United States but for some cultural reason it has never been popular in Hong Kong. It would be a good thing for the market because more mergers will create more efficient firms.'