China Securities Regulatory Commission, Trial Measures for the Provision of Intermediary Services by Securities Companies to Futures Companies

(2) having established a third party custodian system for clients' transaction settlement funds in accordance with provisions;

(3) wholly owning or controlling a futures company, or, along with a futures company, being controlled by the same organization and, in either case, the futures company holding the membership of a futures exchange with a settlement system by member class and the futures company's risk control indicators meeting the required standards for two consecutive months before the date of application;

(4) having the necessary business personnel, with at least five holding futures practitioner qualifications at the company's headquarters, and at least two holding futures practitioner qualifications in the business department intending to launch Intermediary Services;

(5) having established sound systems relating to Intermediary Services such as operational rules, internal controls, risk isolation and compliance reviews in accordance with provisions;

(6) equipped with technical systems that meet the business requirements; and

(7) other conditions as stipulated by the China Securities Regulatory Commission in accordance with market development and the principle of prudential regulation (Article 5).

The standards for risk control indicators in the first item of Article 5 refer to:

(1) net capital of not less than Rmb1.2 billion;

(2) the balance of current assets being not less than 150% of the balance of current liabilities (not including clients' transaction settlement funds and clients' funds entrusted for management);

(3) sum of security provided to outside parties and other forms of contingent liabilities being not more than 10% of the net assets, with the exception of counter-security offered by securities companies on bond issuances; and

(4) net capital being not less than 70% of the net assets
(Article 6).

Securities companies may only accept entrustment for Intermediary Services by their wholly owned or controlled futures companies, or futures companies controlled by the same organization, and may not accept entrustment for Intermediary Services by other futures companies (Article 12).

Related Legislation: Regulations for the Administration of Futures Trading