Chinese broker Huatai Securities given approval for overseas proprietary trading by country’s top regulator
Company can also participate in over-the-counter derivative transactions and sign agreements with domestic and overseas counterparties
Huatai Securities, China’s fourth largest broker by assets, has been given the green light to invest in financial products in overseas markets with its own capital – also known as proprietary trading or prop trading – by the China Securities Regulatory Commission.
Prop trading occurs when a bank or firm invests its own money to earn direct gains, instead of earning commission dollars by trading on behalf of its clients. It usually involves more risks.
Huatai said on Sunday the country’s top securities regulator had also approved its request to invest in overseas products that qualified domestic institutional investors (QDII) are allowed to make investments in.
The QDII scheme was set up by the Chinese authorities to allow financial institutions that meet certain qualifications to invest in offshore markets, such as securities and bonds.
The commission also allowed Huatai to sign agreements with domestic and overseas counterparties about transactions in over-the-counter financial derivatives, including Credit Support Annex, International Swaps and Derivatives Association, National Association of Financial Market Institutional Investors and Securities Association of China agreements.
Huatai is also permitted to provide relevant financial products and services to its clients.
In the meantime, the regulator requires the company to “strictly control” the size of its cross-border business, which will not exceed 20 per cent of its net capital, said Huatai.
“We will comply with relevant laws, rules and regulations when participating in such businesses. We will aim to serve the real economy, meet clients’ needs to manage risks, and strengthen our internal control and risk management,” it said.
On Friday night, Guotai Junan Securities, the country’s third largest broker by assets, also announced it had received a similar approval from the commission for conducting cross-border business.
At Friday’s market close, Huatai Securities were up 0.2 per cent and 0.8 per cent in Hong Kong and Shanghai, respectively, at HK$16.44 and 18.58 yuan.
Guotai Juan Securities closed Friday higher by 0.6 per cent in Hong Kong at HK$18.1. Its A shares were quoted at 19.11 yuan in Shanghai, up 0.1 per cent from the previous close.