The National Association of Financial Market Institutional Investors (NAFMII), China's inter-bank association under the People's Bank of China (PBC), has approved 10 securities companies to underwrite the debt financing instruments of non-financial enterprises in the inter-bank bond market, the organization announced Wednesday.

Out of the 13 securities companies that applied for underwriting qualifications in the inter-bank market, the 10 brokerages which received the organization's nod included Guotai Junan Securities, China Merchants Securities, Everbright Securities, China Securities, Guangfa Securities, Orient Securities, Haitong Securities, Huatai Securities, China Galaxy Securities and Guoxin Securities, according to a statement released on the NAFMII's website.

The NAFMII didn't mention why it turned down applications from three of the brokerages, but did explain that underwriters should have a risk management rating of AA or above from the China Securities Regulatory Commission (CSRC).

"Besides opening a new revenue channel for securities companies, the NAFMII's move marks an important step toward the integration of the country's bond market, which is composed of the inter-bank market and the exchange market," Zhao Xijun, deputy dean of the School of Finance at Renmin University of China, told the Global Times.

In the past, only commercial banks were allowed to offer underwriting services in the inter-bank market on the Chinese mainland, where institutional investors are the main players. There are currently 24 leading underwriters, including 22 banks - all of which were recommended by market members and approved by the PBC in 2005 - bringing new debt issuances into the mainland inter-bank market.

"Following years of rapid development, there has been a rising demand for more diversity among underwriting institutions, indicating a need to change the traditional way that underwriting services are separated among different markets," Zhao explained. "Efforts need to be made to integrate the inter-bank and exchange markets in order to promote competitiveness in underwriters and improve market efficiency."

Debt financing instruments from non-financial enterprises - including short-term bonds, mid-term notes and collective notes - refer to marketable securities issued in the inter-bank bond market by non-financial enterprises and registered with the NAFMII.

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