Marketization and Emerging Private Securities Firms

Recently, some privately owned securities firms have emerged in the market. This is an important symbol of marketization of the Chinese securities industry. It is a logical demand and outcome of the market-oriented mechanism exploration by professional groups. For a long time, the Chinese securities industry has been a highly regulated and policy-oriented industry. The emergence of private securities firms is the beginning of pure marketization under the existing business model in the securities industry. Although such firms are still in the early stage, it is a worthy attempt that is highly correlated with the existing system. For the strategic purpose to promote vibrant, market-oriented development of securities firms, regulators should monitor and protect private securities firms. They could even create a special policy for pilot programs.

Regulators Should Establish a Sound Regulatory Policy Framework for Private Securities Firms

For the purpose of institutional design, regulators should lay down appropriate regulatory principles. They should lower market access requirements and simplify or even cancel the administrative examination and approval process, while specifying regulatory principles and requirements of the behavior of private securities firms. Because such securities firms are still in the early stage, they cannot take too much of a regulatory load. In the framework of the guidance principles of regulatory policies, regulators should bring private securities firms under strong market discipline and to full and complete disclosure of information. They should cause private securities firms to build goodwill with word of mouth and compete fairly in the market.

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