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The Launch of Pilot OTC Trading Business for Securities Companies


With the approval of CSRC, Securities Association of China (SAC) promulgated “Regulations on Over-the-Counter Trading for Securities Companies” (hereafter referred to as “Regulations”). Meanwhile, the first batch of seven securities companies to participate in the OTC market include Haitong Securities, Guotai Junan, Guosen Securities, Shenyin&Wanguo Securities, China Securitries, Guangfa Securities and Industrial Securities.

Over-the-Counter (OTC) trading for securities companies is defined as trades between securities companies and particular counterparts are not through the centralized trading venues, or the behaviors that the securities companies serving for investor are not through centralized trading venues. OTC trading business are carried out in the OTC market between securities companies. The OTC market is clearly targeted on the private placement market and serves as a platform where securities companies can issue, transfer and trade private placement products. OTC market mainly serves for institutional clients. Securities companies formulated relevant suitability management rules for OTC trading, different investor access standards for varied products, and set up customer classification and product risk-rating system to realize best match between financial products of different risk levels and client’s risk tolerance. Trades in OTC market will be mainly based on bilateral contracts, but “Trader Quote Requests and Market Maker Quote Mechanisms” will be tried to implement at the meantime. OTC transaction products will be targeted on private placement products. In the initial stage, taking innovations of asset management business into account, OTC trading market will mainly sell and transfer securities companies’ financial products and financial products by proxy. The design of financial products will move from easy to hard, and these products will be mainly designed, produced and managed by securities companies. During the pilot period, securities companies will attach great importance to compliance management and risk control. OTC trading business will be included in securities company’s risk control system for monitoring, securities companies will identify and evaluate OTC market risks, set up appropriate prevention and control measures in the aspects of regulation, governance and technology management, and form a relatively-concentrated dynamic management system in accordance with the internal control principle of separating the front office, middle office and back office of OTC trading.

After the launch of the pilot project, SAC will closely follow-up the conduct of the business by various companies, sum up experiences constantly, pay attention to risk control and strengthen self-regulation management. In order to promote the development of OTC trading business, SAC is currently formulating “Securities Companies Financial Derivatives Trading Master Agreement” and investor suitability and appropriateness management such self-regulation rules.



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