BEIJING: Guotai Junan Securities, China's third-largest broker by profit, has been approved to trade in the interbank foreign exchange market, making it the first non-bank to enter the business, sources with direct knowledge of the matter said on Wednesday.
The move would represent the latest step by Beijing to liberalise the country's tightly-controlled financial markets. It marks the biggest reform in its forex market since the central bank doubled the daily trading range for its yuan currency in March.
In October, sources told Reuters that China was considering allowing non-banks, including brokerages, insurers and trust firms to trade in the interbank foreign exchange market.
Guotai Junan will be allowed to trade in the spot market, settle and sell foreign exchange and engage in renminbi and foreign exchange derivatives business, the sources said. The sources declined to be identified as they are not allowed to speak to the media.
The brokerage, which was established in 1999, has applied for an initial public offering in Shanghai that could raise nearly 22 billion yuan ($3.5 billion).
Officials at Guotai Junan declined to comment. Officials at the foreign exchange regulator could not be immediately reached for comment.
China has been gradually rolling out a series of market reforms over the past few years aimed at developing its financial markets.
In March, it increased the daily trading band of the yuan, allowing it to rise or fall 2 percent from the official daily midpoint which is set by the People's Bank of China every morning.
The move was seen as a sign of confidence that the central bank had successfully fought off currency speculators, as the yuan had long been viewed as a one-way appreciation bet.
The State Council, China's cabinet, pledged in May to push ahead with a broad range of capital market reforms, including developing a system for direct bond issuance by local governments, streamlining IPO approval processes and removal of restrictions.
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