China online brokers pull apps as trades come under scrutiny

CHINA’S two leading cross-border online brokerages said they will remove their trading platforms from app stores in mainland China this week, as Beijing takes a harder stance on capital flows out of the country.

Futu Holdings and Up Fintech Holding, also known as Tiger Brokers, said on Tuesday (May 16) that the move was to comply with the Chinese securities regulator’s requirements on cross-border brokerage businesses. Futu’s app Futubull will be removed on Friday, and Tiger Brokers’ app will be taken off on Thursday.

Shares of Futu fell as much as 16 per cent, and Up Fintech dropped as much as 12 per cent in pre-market trading in New York. 

Futu and Up Fintech have been operating in a gray area for their mainland China businesses, allowing millions of local investors to evade capital controls to trade shares in markets such as Hong Kong and New York. 

China asked the two firms in late 2022 to rectify “illegal” business activities and stop taking new onshore investors, saying the companies had over the years conducted cross-border securities trading business without approval from the China Securities Regulatory Commission. It followed similar criticism from a senior central bank official, who had questioned the legitimacy of online trading firms, calling their services “illegal” at least twice since 2021.

The criticism had prompted the companies to shift their focus away from the domestic market, with Tiger Brokers resorting to job cuts and Futu eyeing overseas markets to diversify its growth. Futu also abruptly postponed its Hong Kong listing less than a day before its scheduled debut last year. 

SEE ALSO

China warns brokerages not to spread sensitive information

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

“The move is in line with the regulatory stance from late last year and early this year, and is part of the rectification progress as we see the measures being implemented,” said May Zhao, head of equity research at Zhongtai Financial International. “It’s not a total surprise.”

The two brokerages said on Tuesday existing clients in mainland China can continue to use the app to make trades, and users outside of the country will not be affected.

Mainland customers accounted for about 10 per cent of Futu’s new users last year, according to an earlier estimate by Daiwa Capital Markets Hong Kong. Up Fintech had over 20 per cent of its new funded accounts from mainland China in the third quarter last year, according to its chairman Wu Tianhua. BLOOMBERG