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Brokerage

Our brokerage business engages in the following activities:

Securities brokerage: we execute trades on behalf of our clients in stocks, funds and bonds;

Margin financing and securities lending: we provide collateralized margin financing and securities lending, which provides financial leverage for our clients and enables them to engage in short selling; and

Futures brokerage: we execute trades on behalf of our clients in commodity futures and financial futures.


Securities brokerage

We engage in the trading of various securities products on behalf of our customers, including:

• Stocks: stocks of listed companies on the Shanghai Stock Exchange and the Shenzhen Stock Exchange;

• Funds: listed funds, including open-end funds, closed-end funds and ETFs; and

• Bonds: bonds that are listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange, including treasury bonds, corporate bonds (bonds issued by listed companies) and convertible bonds.


Margin financing and securities lending

We obtained the qualification for margin financing and securities lending business from the CSRC in June 2012 and started to conduct such business in July 2012. Margin financing and securities lending business is an important component of our capital-based intermediary businesses, characterized by its capital intensive nature and associated credit exposure.

We offer collateralized financing through our margin financing services to brokerage customers who wish to finance their securities purchases, thereby enabling them to improve investment returns through financial leverage. We also lend securities held in our own accounts to brokerage customers through our securities lending services, enabling them to take advantage of potential short-selling opportunities in the market. Our agreements with customers typically include terms such as margin loan or securities lending amount, maturity date and interest rate.


Futures brokerage

We provide our futures brokerage services through our subsidiary, Central China Futures, which is a member of the Shanghai Futures Exchange, the Zhengzhou Commodity Exchange, the Dalian Commodity Exchange and the China Financial Futures Exchange. As of December 31, 2013, we offer all of the futures products available in China, including 38 commodity futures such as agricultural products, bullion, chemical products and metals, and two financial futures, namely, stock index futures and treasury-bond futures.


Wealth management

In addition to traditional brokerage services, we seek to provide value-added and differentiated wealth management services based on various needs of our customers. We have established the “Central China Wealth” (財富中原) as our wealth management brand name in 2009. We classify our wealth management customers into three categories based on their wealth management needs and risk appetite: “self-service” (customers who rely little on our investment advice); “reference” (customers with moderate needs for investment advice); and “guidance” (customers with high reliance on investment advice), and we provide different service packages to each category of customers and charge different commission rates:

• Central China Express (中原快車): we provide standardized brokerage services, market information and advisory services to “self-service” customers;

• Central China Bible (中原寶典): in addition to the basic services provided under Central China Express, we provide comprehensive market and industry information and investment advisory services to “reference” customers; and

• Central China Housekeeper (中原管家): in addition to the comprehensive services provided under Central China Bible, we also provide “one-on-one” investment advice to “guidance” customers.