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China may open its growing ETF business to U.S. market makers as the country seeks experienced liquidity providers, Reuters said, citing anonymous sources.
Big U.S. market makers, including Jane Street Capital and Ken Griffin’s Citadel Securities, would most likely be among the firms tapped, the news outlet said. Amsterdam-based Optiver may also be among the companies China is eyeing to help it make its markets more efficient.
The country’s exchange-traded fund business has surged, with its assets nearly tripling to $510 billion over the past two years thanks to investments from government bodies, Reuters said. While China has sought to develop its own market makers, older firms like New York-based Jane Street and Miami-based Citadel have the experience that the country needs, sources told Reuters.
Market makers help smooth equities trading by facilitating trades—buying and selling shares—between large banks and institutions to ensure efficient markets. They also help reduce costs associated with trading, according to Citadel's website.
Trade War Intensifies
Still, the escalating series of tariffs the U.S. and China have imposed on each other recently may dampen China’s enthusiasm for bringing in the U.S. firms, the sources told Reuters.
Both companies recently undertook measures to boost their China presence. Citadel earlier this year applied to start a securities brokerage in the country and recently hired a former official with the Chinese Securities Regulatory Commission to develop its business in that country. Jane Street has expanded its Hong Kong offices and plans to add 40 workers to its 400-strong workforce there, Reuters said previously.
None of the cited companies, nor the China Securities Regulatory Commision, provided comments to Reuters.
China ETFs Rise
At the same time, China has been buying ETFs to support its markets, Bloomberg reported. A record $24 billion was invested in the market last week, mostly into ETFs favored by the country’s so-called national team, the news agency said.
Source: etf.com data
China-focused ETFs are rising today with the $5.9 billion KraneShares CSI China Internet ETF (KWEB) surging 4.1% and the $5.6 billion iShares Trust China Large-Cap ETF (FXI) adding 2%. KWEB has dropped 15% this past month, and investors pulled $1 billion from the fund last week.