China's Securities Regulator Issues Margin Trading Guideline

BEIJING, Jan. 25 -- China's securities regulator has issued a guideline for margin trading, saying that securities companies applying for the business should have at least 5 billion yuan (732 million U.S. dollars) net capital in the latest six months.

The guideline was issued Friday by the China Securities Regulatory Commission (CSRC) two weeks after the State Council, the Cabinet, gave green light to pilot the business on a trial basis.

Timetable indicating when margin trading would begin was not yet given. But publication of the guideline meant that securities companies might be able to start applying for the business soon.

The CSRC required securities companies must use their own fund and securities for running the margin trading business, according to the guideline.

Applicants should also have developed transaction settlement systems for margin trading, and pass the review by the Securities Association of China.

China's State Council approved "in principle" the launch of index futures and gave nod to the margin trading business on Jan. 8.

Margin trading allows securities companies to lend stocks and money to investors.

Stock index futures are agreement to buy or sell an index at a preset value on an agreed date. Index futures would give investors a mechanism to profit from declines in stock prices, allowing them to hedge risks and helping ease fluctuations in market.