China Drafts Rules on Liquidity Support for Securities Firms

(Bloomberg) -- China’s securities regulator is soliciting public opinions over a rule allowing a state fund to bail out securities companies that “face significant liquidity risk,” according to an online note from the China Securities Regulatory Commission.

The rule also regulates the methods and sources of liquidity support securities firms can seek -- ranging from asset sales to seeking assistance from shareholders or other brokerages.

The regulation is under public review until August 5, according to the note. It didn’t disclose when the rule would be implemented.

In late June, the People’s Bank of China allowed brokerages to issue more debt as officials sought to ease a funding strain spurred by the government seizure of a bank. That month the central bank and the securities regulator called on major banks and brokerages to increase financing support to smaller brokers, according to people familiar with the matter.

To contact Bloomberg News staff for this story: Gao Yuan in Beijing at ygao199@bloomberg.net

To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Cormac Mullen, Dana El Baltaji

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With assistance from Bloomberg