Shenyin & Wanguo Securities, a leading mainland brokerage, is seeking approval to operate a gold brokerage business as it moves closer to its goal of issuing and trading gold bonds.
The firm, if it wins approval, would be the first brokerage in China to issue gold bonds, a derivative product usually issued by companies that mine the precious metal.
The broker had applied this month to the China Securities Regulatory Commission for permission to operate a gold brokerage business, a source familiar with the situation said.
The company already has preliminary regulatory approval for a trading seat on the Shanghai Gold Exchange. CSRC issued a letter to the broker early last month, saying it 'agreed in principal to give approval to Shenyin & Wanguo on its application for exchange membership'.
Designed to protect bond issuers, the gold bond also helps gold mining companies to sell the metal. When the paper matures, bond holders may not necessarily receive gold. If the gold price rises during the period until maturity, the net value of the bond holders' gold holding will also increase.
Approval from the CSRC could make Shenyin & Wanguo the first securities brokerage among Shanghai Gold Exchange's members, most of which are gold miners, smelters and processors.