A wave of mobile apps designed to make it easier and more convenient to trade stocks and shares has fallen foul of the China Securities Regulatory Commission (CSRC).
In a special alert issued to the investment community, the regulator zeroed in on platforms that “cooperate with overseas brokerage companies, providing channels and services for domestic investors to trade on the overseas equity market”.
Such platforms, it said, were potentially dangerous because they lack the ‘legal protection’ that would typically stem from formal approval – something that the CSRC has so far withheld from apps of this type.
“By using the internet platforms to trade [on] the overseas market,” the regulator warned, “investors will have their accounts and money offshore. Once disputes happen, the interests of investors will lack effective protection.”
Brands singled out in the alert included Jimu Stock, Futu Network and Tiger Securities, the latter a wholly owned subsidiary of leading Chinese smartphone manufacturer Xiaomi. In July, the telecom firm’s app generated turnover of $100m – and that was only its first month of operation.
Speaking to the South China Morning Post, an anonymous Tiger Securities source said: “The current size of the [share apps] market is still small, compared to the A-share market, which saw average daily turnover of several hundred billion.
“However, it has already aroused the attention of regulators as it may release huge potential demand from Chinese people to invest overseas… it will further weigh on the capital outflow pressure.”
At present, the affected firms are categorised as technology companies, and as such are not officially permitted to work as financial services providers.
“According to the Securities Law,” the CSRC alert explained, “without the approval of the securities regulator under the State Council, [no] individual or institution can run [a] brokerage business. Also, overseas brokerage companies should get [the] regulator’s approval to run brokerage business inside China.”
The regulator’s tone and message are distinctly at odds with market trends.
Indeed, the alert has emerged a little under two months since US zero-fee trading app Robinhood announced it was entering China, with the aim of enabling investors there to trade on the US stock market.
In a landmark deal, Robinhood agreed a process of integrating its technology with that of the specialist trading app StockMaster, operated by China’s leading search giant Baidu.
Robinhood arrived at that commercial solution to play catch-up with its main business rival, Interactive Brokers – a shares app firm that has already started working in China on an unregulated basis.
Speaking to TechCrunch, Robinhood co-founder Vlad Tenev said: “It’s a tough market, but we’re optimistic that we’re providing a lot of value.”