Regulator Signals Expansion of the FX Settlement-and-Sales Pilot for Securities Firms, with Seven Already Licensed to Operate

Zhu Hexin, Deputy Governor of the People's Bank of China and Administrator of the State Administration of Foreign Exchange, said at the 2026 Financial Street Forum annual meeting: "Promote the opening-up and development of the foreign exchange market, expand the pilot program for securities companies' settlement and sales of foreign exchange, support financial institutions in serving enterprises — especially small and medium-sized ones — in managing exchange rate risk, improve cross-border service capabilities, better support the coordinated development of offshore and onshore financial markets, and help advance RMB internationalization."

According to Securities Times, seven securities firms have already obtained pilot qualifications for the settlement and sales of foreign exchange and have begun operations. Regarding the regulator's statement on further expanding the pilot, analysts said the move will help diversify participants in the FX market, expand securities firms' cross-border financial services and FX risk management business space, and help build world-class investment banks.

Diversifying participants in the FX market

China Merchants Securities said the mention of "expanding the pilot for securities companies' FX settlement and sales business" at the 2026 Financial Street Forum will diversify FX market participants and improve financial institutions' ability to help SMEs hedge exchange rate risk. For securities firms, local- and foreign-currency businesses are expected to develop in a more balanced way, though constrained by current capital scales and the progress of business infrastructure, the business model and revenue potential remain to be seen.

Zhongtai Securities believes expanding the pilot will help broaden brokers' cross-border financial services and FX risk management business space; stronger linkage between RMB cross-border use and offshore-onshore financial markets will also enhance the asset allocation and financing service functions of Hong Kong as an international financial center. With the coordinated advancement of financial institutions' reform and high-level opening-up, the efficiency of the financial system is expected to improve, creating new development space for quality banks and insurers, comprehensive brokers and institutions with cross-border business advantages, and gradually enhancing the appeal of Chinese assets to long-term capital.

CSC Financial (CITIC Construction Investment) said the pilot expansion will help enrich service providers in the FX market and make the links among securities investment, cross-border investment and financing, and exchange rate risk management smoother. For enterprises, richer FX risk management tools and services from financial institutions will help them hedge according to their own foreign-currency income, costs and financing structures, reducing the impact of sharp exchange rate swings on operating profits and cash flows.

Changjiang Securities said expanding brokers' FX settlement-and-sales pilot will strengthen exchange rate hedging services for SMEs and push the FX market to expand and open up, with the ultimate goal of helping market entities make good use of both domestic and international markets and resources, steadily serving RMB internationalization and high-level institutional financial opening-up.

Seven brokers have obtained qualifications one after another

So far, Guotai Haitong (formerly Guotai Junan), CITIC Securities, Huatai Securities, China Merchants Securities, Orient Securities, CSC Financial and CICC hold FX settlement-and-sales qualifications, allowing them to conduct spot settlement and sales for themselves and clients and, as required, participate in interbank FX market derivatives trading.

Securities Times noted that Guotai Junan (now Guotai Haitong) was among the first brokers to obtain the qualification. In September 2019, SAFE approved pilot qualifications for three brokers — CITIC Securities, Huatai Securities and China Merchants Securities — allowing them, under controllable risk, to conduct spot settlement and sales for themselves and clients and to participate in interbank FX market trading as required.

At the time, SAFE said the pilot would help domestic securities firms develop local- and foreign-currency businesses in a balanced way, accelerate the cultivation of world-class investment banks and promote high-quality financial development; it would also expand FX market participants, enrich FX trading products, and further deepen and enliven the FX market, improving the market-based formation mechanism of the RMB exchange rate.

SAFE also said it would guide pilot institutions to conduct the business in a steady and orderly manner, summarize pilot experience in due course, study expanding FX market participants, and promote the healthy development of FX business by non-bank financial institutions.

In January 2020, following CITIC, Huatai and China Merchants, SAFE approved pilot qualifications for three more brokers — Orient Securities, CICC and CSC Financial — under the same framework.

First trades completed in quick succession

Shortly after obtaining qualifications, many brokers completed their first transactions. In September 2019, CITIC Securities and Huatai Securities each completed their first interbank RMB foreign exchange transaction, with counterparties Bank of Communications and China Merchants Bank respectively.

In February 2021, CICC handled a differential-settlement forward FX settlement-and-sale transaction for Ping An International Financial Leasing (Tianjin), marking CICC's first agency FX settlement-and-sale business. In December 2021, Huatai Securities completed its first capital-account FX settlement-and-sale transaction, its first agency settlement-and-sale deal. Orient Securities said the qualification helps the company develop domestic and overseas businesses in coordination, provide clients with more comprehensive services, advance internationalization, and accelerate its pace toward becoming a first-class international investment bank; it also signifies the firm's leading position in fixed income and the initial achievement of its goal of building a full FICC business chain. In its interim report this year, Orient Securities said the transaction rates for its settlement-and-sale services would be determined through fair negotiation considering prevailing interbank FX market levels, transaction scale and rates applicable to independent third parties for similar services.

As of September 30 this year, the interbank FX market had seven fund-and-securities-type members.

(Source: Securities Times)