UBS enters China's financial futures market

The acquisition of a controlling stake in Shanghai Pumin Futures Brokerage underlines UBS's commitment to the market.

UBS Securities has agreed to buy a controlling stake in Shanghai Pumin Futures Brokerage in a move that will give the Swiss bank access to China’s burgeoning financial futures market.

The UBS affiliate said it had regulatory approval to acquire a 95.42% stake in the firm and to invest Rmb90 million ($14.8 million) in the Chinese futures broker, underlining its commitment to the business.

“… [We] hope to make available a financial futures brokerage service to our clients in the future and this complements our current offerings, including domestic equity advisory, QFII and RQFII brokerage, electronic trading strategy & execution and OTC derivative,” said Xia Yang, head of equities of UBS Securities.

Shanghai Pumin will continue to operate under its own name, a source familiar with the situation said.
To access China's financial futures market, domestic securities houses can either apply directly for a licence, which can be a complicated process, or acquire a futures company that already has a licence. 

Citic Securities, Haitong Securities, and Guotai Junan Securities are among the companies that currently have a licence to broker financial futures, according to the website of the China Financial Futures Exchange. 

China's financial futures market has grown sharply since April 2010, when the country's first financial futures product was introduced based on the Hushen 300 Index, a benchmark that tracks shares listed in Shanghai and Shenzen.

Trading volumes in Chinese financial futures products, including 5-year Chinese treasury bond futures, reached Rmb141 trillion in 2013, representing 52.72% of the total futures products traded in the country, including longer-established Chinese commodities futures, said UBS.

The market is one that the Chinese government is keen to encourage. In the recent Third Plenum statement issued by China's leaders, the government signalled it wanted to foster more financial innovation and to build a multi-layered financial market with more products.

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