China's securities regulator approved a second batch of five brokerages to deal in margin trading and short selling, and also lowered the threshold in a bid to attract more firms to participate in the pilot program.

The China Securities Regulatory Commission approved the applications of China Galaxy Securities Co, Shenyin & Wanguo Securities Co, Orient Securities, China Merchants Securities Co and Huatai Securities Co, Xinhua news agency said.

The CSRC also lowered the brokers' net capital requirement from 5 billion yuan (US$730 million) to 3 billion yuan in the past six months in a bid to attract them to take part in the program.

A total of 15 brokerages qualified under the new standard, including Essence Securities, China Securities, Ping An Securities, China International Capital Co Ltd and Guoyuan Securities.

Margin trading lets brokers fund stock purchases by individual investors. Short-selling allows retail investors to sell borrowed securities with an aim to buy them back later at lower prices to profit from the difference.

The margin trading and short selling pilot program is initially limited to six brokerages - CITIC Securities, Guotai Jun'an Securities, Haitong Securities, Guosen Securities, Everbright Securities and GF Securities.

The new derivatives generated a trading value of 3.05 billion yuan by May 31 since its debut on March 31, with 2.8 billion yuan for margin trading and 222 million yuan for short selling.

The CSRC is also tightening rules to forbid fund managers from trading in stock index futures to prevent manipulation of the stock market, according to Xinhua news agency.

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