Shanghai bourse to appoint market makers for SMIC, other stocks on tech board in boon for Citic and rival brokerages
- Bourse operator to pick 10 securities firms in the first batch of market makers, with half of them having passed technical tests, report says
- Tech board, known as the Star Market, counts No 1 chip maker SMIC as the biggest among its 437 listings and US$800 billion of capitalisation
The Shanghai Stock Exchange is set to appoint a group of market makers for US$800 billion of stocks listed on its Nasdaq-like technology board, a move that is likely to spur transactions and profits at the nation’s biggest brokerages.
The innovation comes as the board, known as the Star Market, celebrates its third anniversary on July 22. The board, a brainchild of President Xi Jinping, was mooted to help fledgling start-ups source public funds to drive the nation’s ambitions to become a technology powerhouse and compete with the world’s best companies.
The market-making mechanism could generate a 15 per cent jump in trading volume annually, according to Citic Securities. It could also boost profits of brokerages with market-making capabilities by as much as 12 billion yuan (US$1.8 billion), according to an estimate by Caitong Securities.
“That is going to be an innovative business for brokerages,” Shen Juan, an analyst at Huatai Securities based in Shenzhen. “They will have new sources of revenue and generally help boost the efficiency of asset pricing.”
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Market makers provide two-way quotes for securities, typically on their own accounts, profiting from the spreads between bids and offers while providing additional liquidity on the exchange. Without market makers, buyers and sellers are currently matched automatically by the stock exchange based on prices fed into its central computer systems.
The Star Market hosts 437 companies with a combined capitalisation of 5.4 trillion yuan, making up about 6.6 per cent of China’s onshore markets. About 42.5 billion yuan worth of stocks changed hands every day this year, versus 43 billion yuan a day in 2021, according data compiled by Western Securities and Huatai Securities.