Two Nasdaq-listed online brokerages serving Chinese clients are preparing to further reduce their presence in the country, as Beijing tightens controls on private companies, capital flight and data flows.
Futu Holdings Ltd., FUTU, 3588.HK , and UP Fintech Ltd., TIGR, also known as Tiger Brokers, are planning to delist from online stores in China that allow their customers to An application for trading overseas stocks.
After the Wall Street Journal report was published, a spokesman for Tiger Brokers said the firm would remove its trading platform from app stores in China starting Thursday. The company stated that this adjustment was made to comply with the requirements of the China Securities Regulatory Commission (CSRC) for its cross-border business in China, and existing domestic customers will not be affected by this adjustment.
According to a regulatory announcement, Futu Holdings said it would remove its Futu Niuniu (Futubull) app in China starting Friday, after which existing domestic customers can still trade on the app.
Following the announcement, Futu Holdings and Tiger Securities closed down 4.4% and 7.4%, respectively, on Tuesday.
In December last year, the China Securities Regulatory Commission issued a statement saying that the two brokerages conducted cross-border securities business for domestic investors. According to relevant laws and regulations, their behavior constituted illegal securities business. Both Futu Holdings and Tiger Securities offer services to Chinese citizens who already hold dollars and other currencies in foreign bank accounts, a business that has also attracted Chinese financial firms as well as multinational banks and institutions.
The two brokerages are reducing their services in China, and many companies are now facing thorny questions about how to operate in China. Chinese regulators have stepped up scrutiny of foreign companies in recent weeks, including interviewing employees at the Shanghai office of consultancy Bain & Co. and detaining Beijing-based employees of U.S. due diligence firm Mintz Group. Foreign executives are increasingly concerned that the boundaries of service delivery in China will shift.
The fallout from the forced removal of Futu and Tiger’s apps could spread beyond the two companies and further undermine confidence in the direction of China’s regulators, these people said.
Futu Holdings and Tiger Securities have popular retail trading apps similar to Robinhood Markets in the United States. Retail investors in China and elsewhere use the companies’ apps to trade stocks listed on major international exchanges in the United States, Hong Kong and elsewhere and make other financial investments.
The industry is in a gray area because these companies are subject to regulators in places where they operate, such as Hong Kong and Singapore, while also serving citizens in China, where different rules apply. Futu Holdings is registered in the Cayman Islands and headquartered in Hong Kong. China’s Tencent Holdings (0700.HK, TCEHY, referred to as: Tencent) is its major shareholder. Tiger Brokers is also registered in the Cayman Islands and is headquartered in Singapore and Beijing.
To serve clients in China, Futu Holdings and Tiger Securities, like many international financial institutions outside of China, took advantage of an existing Chinese regulation that allows Chinese people to legally transfer the equivalent of $50,000 in renminbi each year. to overseas.
It was unclear whether the CSRC would look beyond Futu Holdings and Tiger Securities, both private companies regulated outside China. China’s Premier Li Qiang recently pledged to treat state-owned, private and foreign companies equally institutionally and legally. Some large Chinese financial firms also offer domestic apps that allow clients to trade overseas stocks.
Due to regulatory pressure, Futu Holdings and Tiger Securities will remove certain apps from online app stores in China by May 19, according to people familiar with the matter. The two companies stopped accepting new customers online after being halted by Chinese regulators in December. Removing the apps could further dent its customer base, these people said. Existing customers will still be able to use the services of these companies.
The Chinese government took a similar step against Didi Global Inc. DIDI in a 2021 tech crackdown, when the ride-hailing company was ordered to suspend new user registrations in China for about two years , although existing users of the app at the time will continue to use it.
Wu Tianhua, CEO of Tiger Securities, said in an earnings conference call at the end of March that the company has stopped accepting new users from mainland China since midnight on December 31 last year. Of the 27,300 new accounts it added in the last quarter, about 90% were from outside mainland China, Tiger Brokers said.
In the future, existing Tiger Brokers users in China will be provided with guidance on updating and downloading its app, the company said on Tuesday.
According to Futu’s data, as of June last year, 35% of Futu’s paying customers were users in China. The company’s net income rose 4% last year to $375 million on $976 million in revenue.
(update completed)