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Bank-backed futures brokers emerge, to accelerate industry consolidation

2014-07-31 GMT+8:00

BEIJING, July 28 (Xinhua) – Chinese banks are accelerating its pace in infiltrating into futures brokerage business after securities brokers started the first wave of acquiring futures brokers. Although banks are still not allowed to buy futures companies directly, indirect acquisition and shareholding cases are popular.

If banks are allowed to participate in futures businesses on a large scale, the futures industry will embrace a new round of rapid development and reshuffling. Traditional futures brokers together with the futures companies with securities dealers and banks background are likely to become pillars of the futures industry.

"A wave of banks' acquisition of futures brokers is coming," said Shi Chunsheng, vice general manager of Yongan Futures. Many banks have already set up staple commodities departments, actively participated in market maker business or tried to purchase futures companies.

Currently, there are just a few of bank-backed futures companies inChinaincluding BOC International Futures under the flagship of the Bank of China, ICBC International Futures under the ICBC, and Liangmao Futures and Shanli Futures indirectly controlled by the China Construction Bank and Industrial Bank respectively. Meanwhile, China Merchants Futures and CITIC Futures also have background of banks.

Industry insiders say that bank-backed futures companies will speed up expansion this year as banks have rising demand to develop futures innovative business and overseas futures business as part of their efforts to build a big financial platform.

"Through controlling futures companies, banks are able to extend their business to a potential derivative product market, which is part of their plan to build a big and complete financial group," noted Gao Shang, a senior researcher of Haitong Futures.

"The futures market will be the last financial field to see a rapid development," pointed out Jing Chuan, deputy general manager of CITIC Futures. High net-worth clients of banks need diversified asset management products while futures derivatives will provide new options for them.

According to Li Zhoulei, a researcher with Everbright Futures, banks can use their futures companies to strengthen commodities mortgage finance and provide industrial clients with financing services. Besides this, if futures companies need to issue the related wealth management products, banks can use their wide selling channels to promote the products and thus reduce futures companies' issuance cost.

After acquisition of futures brokers, banks are expected to step into the financial futures market to intensify their risk management and also make staple commodity business to create new profit point, said Chen Xiaoyong, a researcher with Baocheng Futures. Meanwhile, they are able to consolidate securities, insurance and fund resources and accelerate their pace to internationalization.

In the futures industry's M&A wave started by securities brokers, most futures companies with securities background have seen their business performance rise quickly thanks to securities brokers' research and client advantage.

However, due to policy barriers, the cooperation between banks and futures companies is currently concentrated in margin deposit, settlement and account transfer. If restrictions on banks' participation in futures market are gradually removed, a huge amount of client resources and capital stocks from banks will be introduced into the futures market, which is likely to further strengthen competition and promote M&A of the futures industry.

Emergence of bank-backed futures brokers is both an opportunity and challenge for futures companies. In the future, the futures companies' development will be diversified with some focusing on asset management and some on industrial services, noted Li.   (Edited by Liu Xiaoyun,