China blocks offshore brokers

Chinese regulators intend to prohibit online brokers Futu Holdings Ltd and UP Fintech Holding Ltd from offering foreign trade services to continental clients. All because of concerns about data security and capital outflow.

Futu Holding Lts and UP Fintech Holding Ltd are Chinese companies listed on the Nasdaq stock exchange. A ban on offering foreign trade services would prevent many mainland Chinese retail investors from quickly trading their securities in the US and Hong Kong markets. Authorities express concern about the outflow of capital and fear that fast-growing companies may counter China’s currency control program.

Companies will likely receive information about the ban in the next few months. Futu said it has attempted to communicate with the Chinese authorities. However, it did not receive a formal ban. The company works as before.

UP Fintech has declared that it will continue to follow the rules set by global regulators. Therefore, it will abide by and implement the new practices.

Chinese government’s comment

The Chinese authorities in October have already expressed their concern about cross-border brokers. Thus, it deepened the decline in both enterprises by nearly 80% compared to the peak in February. The central bank, the China Securities Regulation Commission (CSRC) and the State Currency Exchange Administration (SAFE) have not commented on Futu and UP Fintech.