A two-tier ranking of mainland brokerages under the Securities Law - expected to be passed tomorrow - will limit to about 15 the number of houses qualified to underwrite new share offers and carry out proprietary trading.
Industry sources said the China Securities Regulatory Commission (CSRC) had indicated to the country's 90 brokerages and 240 stock trading units controlled by trust and investment corporations that the ranking would mean only big brokerages could provide a comprehensive range of investment banking services.
'We understand that only about 15 houses will be considered as comprehensive securities firms which can carry out services from underwriting new offers, carrying out proprietary trading, and trading on clients' behalf,' a Haitong Securities source said.
A Shenzhen-based analyst said the overwhelming majority, especially stock units under trust and investment companies, would be restricted to trading on behalf of clients or to broking activities.
The two-tier ranking is one of several new and stringent provisions in the law, which mostly gives legal backing to existing practices.
Six years in the making, the law will stipulate that first-tier securities houses have a capital base of 300 million yuan (about HK$279.2 million) to 500 million yuan, a league which would include China Guotai J&A, Shenyin & Wanguo, China Southern, Hua Xia, Haitong and Everbright.
It is understood the CSRC has reserved six slots for smaller houses set up by provincial governments to qualify as comprehensive securities firms, which have set off a spate of fund-raising exercises.
