Brokers may get more room to grow (2)

"The move could be considered as part of the regulators' efforts to liberalize China's capital market, which would encourage brokerages to compete," Li Bo, an analyst from GF Securities, told the Global Times Sunday.

"To compete for market share, it's expected that securities companies will set up as many branches as they can once the new rules take effect," Li said. "And large-scale brokerages will surely prevail over small ones since they have greater access to capital and other resources."

That being said, the brokerage sector will likely see a gradual move toward consolidation as small players get gradually squeezed out of the market or acquired by their rivals, according to Li.

Yet, if the CSRC's proposal goes into effect, it won't allow for the unlimited expansion of the securities sector. Friday's draft stipulates that a brokerage may be prohibited from opening new branches if it has any record of administrative or criminal punishment for major irregularities or illegal behavior during the past two years, or if it was subject to any major regulatory measures over the past year, or if one of its branches is undergoing investigation by relevant authorities.

The new rules also specify detailed approval and regulatory requirements for the opening, acquisition and shutting of securities branches, with a view to adapting to the internal and external changes faced by the brokerage sector, the CSRC explained.

Opinions and suggestions on the draft can be made until February 22.