China to let brokerages borrow stocks and cash
21 October 2010 Shanghai
Image: Shutterstock
China plans to allow brokerages to borrow stocks and cash to fund their margin trading and short selling business, the Shanghai Â鶹´«Ã½ News has reported.
China Â鶹´«Ã½ Finance Co. would act as an intermediary that channels securities and funds between brokerages, according to draft rules, unidentified sources were quoted as saying in the report.
China Â鶹´«Ã½ Finance would also be able to borrow stocks from mutual funds, insurers, China's social welfare fund and major shareholders of listed companies, while it could sell bonds to borrow money.
Margin trading - whereby investors borrow to fund stock purchases - and short selling - whereby investors sell borrowed securities with a view to buying them back later at a lower price - are essentially designed to allow people to profit from a declining market. However, they also tend to make equities a more complicated playground for retail investors.
China Â鶹´«Ã½ Finance Co. would act as an intermediary that channels securities and funds between brokerages, according to draft rules, unidentified sources were quoted as saying in the report.
China Â鶹´«Ã½ Finance would also be able to borrow stocks from mutual funds, insurers, China's social welfare fund and major shareholders of listed companies, while it could sell bonds to borrow money.
Margin trading - whereby investors borrow to fund stock purchases - and short selling - whereby investors sell borrowed securities with a view to buying them back later at a lower price - are essentially designed to allow people to profit from a declining market. However, they also tend to make equities a more complicated playground for retail investors.
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