Chinese brokers tighten client scrutiny to mitigate over-leveraging risks, Bloomberg reports

Chinese brokers are intensifying the scrutiny of new accounts and tightening reviews of margin financing, securities lending, and options trading, as part of regulatory efforts to curb risky bids after a sharp market pullback, Bloomberg reported on Monday.

Brokerages including Citic Securities and East Money Information have raised compliance requirements for clients seeking access to leverage or derivative trading, the report said.

The measures also include more rigorous assessments of clients’ financial backgrounds, trading history, and risk tolerance before granting eligibility for margin financing or options trading accounts, according to the report.

For investors who opened new accounts in the past six months or have received frequent margin calls, brokers will restrict them from further borrowing.

This move came as a surge of retail investors flooded into A-share markets and leveraged heavily to increase gains during this year’s rally. However, heightened market volatility triggered a wave of forced liquidations in late July, compelling many retail traders to exit their positions.

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