Chinese Regulators Endorse Market Recovery, Easing Brokerage Barriers

China's CSRC feels confident enough to lift a ban on brokerages from adopting net selling positions in proprietary trading.

Amidst countless predictions from a pantheon of leading analysts on China ranging from periods of resurgence to doomsday crises, China has opted to rewrite the rules for its proprietary trading.

China’s volatility is indeed gradually stabilizing in recent weeks, as equity markets have managed to pare some of its debilitating losses of Q3 2015, which saw cataclysmic drops in a majority of its indices, including the Shanghai composite.

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As a result, the China Securities Regulatory Commission (CSRC) has alleviated the shares required to engage in propriety trading, effectively lifting an order that required brokerages each day to buy more shares than they sell. Despite this measure however, financial markets have still been bludgeoned with regulatory crackdowns in a bid to secure greater transparency for its domestic markets. This has led to multiple probes and investigation against two of China’s largest brokerage centers.

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In another rarely served notice, the Asset Management Association of China (AMAC) also recently reported that the group could not even secure contact with twelve of the country’s hedge fund firms, which ultimately does little to allay any concerns raging over liquidity in China in recent months.

In light of these lapses, the CSRC felt confident enough to lift a ban on brokerages from adopting net selling positions in proprietary trading, arguably seen as a necessary check against market abuse. The move is an obvious endorsement from the securities regulator, on the back end of an equity market that has since recovered upwards of 20% off of its summer lows.

The measure was originally levied against Chinese firms and brokerage entities back in July during the dearth of the market collapse – at the time regulatory authorities had ramped up efforts to mitigate an already steadfast market crash.

Furthermore, earlier this month, China resumed its initial public offerings (IPO), ending a hiatus that was implemented back in early July. This week alone, a total of ten Chinese firms applied for approval to raise more than 3 billion yuan via mainland listings, according to a recent Reuters report.

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