(Yicai Global) Sept. 19 -- Eight brokers, including China Securities, have received regulatory approval to become the first batch of market makers for Shanghai Stock Exchange's Nasdaq-like Star Market.
China Securities, Huatai Securities, China Galaxy Securities, Shenwan Hongyuan Group, Caitong Securities, Orient Securities, Guosen Securities, and Sinolink Securities will help increase the tech-focused index's vitality and lower non-rational fluctuation, according to a notice the China Securities and Regulatory Commission published on its website on Sept. 16.
The National Equities Exchange and Quotations, commonly known as the new third board, introduced the market makers mechanism in August 2014. China's securities regulator said to pilot market-making on Star Market in January.
Star Market will gradually transform into a hybrid transaction mechanism from the existing price-bidding transaction after introducing market makers, Yicai Global learned from brokerages. Market makers will provide the market with sustained liquidity, increase pricing efficiency, and reduce price fluctuations caused by speculations, they said.
The market-making business will become a new source of profit for brokerages, as it can develop in a coordinated manner with the existing investment banking and research and consultancy businesses to provide more all-around services to clients and increase brokerages' core competitiveness, Orient Securities pointed out.
To become market makers for Star Market, brokerages need a net capital of at least CNY10 billion (USD1.4 billion) in the previous 12 months and a grade above A in each of the past three years. Leading Chinese brokerage Citic Securities and others disclosed their plans to apply for conducting market-making business for Star Market before, Yicai Global learned.
Star Market began trading in July 2019. It was the first market in the Chinese mainland to pilot the registration-based initial public offering system, allow listings of loss-making tech firms and those with special equity structures, and expand the daily exchange-imposed limit to 20 percent from the 10 percent on the main board market.
The 463 companies listed on Star Market had a total market capitalization of nearly CNY5.8 trillion (USD832.9 billion) as of Sept. 16, data from the SSE showed.
Editors: Dou Shicong, Futura Costaglione