On Friday, the securities regulator in China said that two brokerage operators, Futu Holding and UP Fintech Holding, have been involved in the unlawful securities business and will be asked to take corrective measures.
China Takes Action against Futu and Up Fintech (Tiger Brokers)
Reuters reported that the China Securities Regulatory Commission (CSRC) would ban both brokerage platforms from soliciting new business from investors in mainland China.
The news came after Futu, a company backed by the Chinese technology giant Tencent, abruptly postponed its plans to list shares on the Hong Kong Stock Exchange, saying it was "clarifying certain matters" with the bourse. The move was revealed on Thursday, less than a day before the intended listing on Friday, without providing any details.
Futu and Up Fintech (operating as Tiger Brokers) are two popular online brokers that offer investors from mainland China access to the stocks listed on global exchanges. Both companies are registered in Hong Kong, along with a few other jurisdictions outside China. However, the 'one country, two systems' policy does not extend the licensing scope to the mainland.
Both companies operate in a grey area as mainland Chinese regulators do not offer licenses to online brokerages specializing in cross-border trades.
An Expected Action against Futu and Up Fintech (Tiger Brokers)
Earlier, media reports suggested China's expected action against such online brokers. A senior executive from the People's Bank of China (PBOC) said that "cross-border online brokerages are driving in China without a driver's license [and are] conducting illegal financial activities."
Futu has been pushing to strengthen its presence outside China. It has gained a digital brokerage license in Singapore and is focused on acquiring customers outside the mainland. Additionally, the Tiger Brokers' operator follows the same strategy and acquired Hong Kong-based Ocean Joy Securities last year after obtaining regulatory approval in Singapore. Both companies are also mulling over offering cryptocurrency services outside mainland China.
An ad of Tiger Brokers Singapore
Moreover, the demand for Up Fintech's services can be seen in its quarterly financials. The company generated $55.4 million in total revenue for the third quarter of 2022, which is an increase of 3.6 percent from the previous quarter but a decline of 8.8 percent year-over-year. Furthermore, there was a drastic drop in the company's net income, which came in at $3.3 million compared to $20.5 million in the same quarter last year.
