Every day, clients inquire about whether their companies can be qualified for the margin trading and short selling business, Chen said. If not, they will go to other securities firms. "All the clients lost without the qualification of margin trading and short selling are big ones, which is a severe test to any securities company," he said.

There are currently 106 securities firms in China, of which 10 are listed on the stock market. Qualified securities firms have submitted their trial schemes to the SAC. According to the SAC, it will release the list of the first batch of securities firms for the trial of margin trading and short selling business after the evaluation process concludes.

But the number of securities firms selected for the trial will be limited. Only 11 firms participated in the previous test, and the CSRC said the first batch for the trial program would be selected from the first 11. Of these firms, CITIC Securities Co. Ltd., Everbright Securities Co. Ltd., Haitong Securities Co. Ltd., China Merchants Securities Co. Ltd. and Guoyuan Securities Co. Ltd. meet the requirement of net capital of more than 5 billion yuan ($732.06 million), but CITIC Securities Co. Ltd. simultaneously controlled three other securities firms, which will hinder its chances on involvement in the trial unless changed.

For securities firms, getting the green light for the trial program will give them a new growth point to reap profits.

According to international practice, the interest rate for margin trading and short selling will be raised by 3 percentage points based on the interest rate of banking loans in the same period. If a company's trading volume of margin trading and short selling accounts for 15 percent of its total trading volume, its revenue will increase by 30 percent with the interest, commission and service charge.

June 30, 2006: The CSRC issues Measures for the Administration of Pilot Margin Trading and Short Selling, which came into effect on August 1, 2006.

August 21, 2006: The Shanghai and Shenzhen stock exchanges issued detailed rules on a pilot margin trading and short selling program.

August 29, 2006: China Securities Depository and Clearing Corp. Ltd. issued detailed rules on depository and clearing practices for margin trading and short selling.

September 5, 2006: The SAC promulgated a prerequisite clause of margin trading and short selling contracts and prerequisite clause of additional risk disclosure statement for margin trading and short selling.

April 25, 2008: The State Council promulgated Regulations on the Supervision and Administration of Securities Companies, which came into effect on June 1, 2008, and incorporates margin trading and short selling.

January 8, 2010: CSRC officials said the State Council agreed in principle to launch a trial program on margin trading and short selling.

Differences Between China and U.S. in Margin Trading and Short Selling

The United States: With a certain proportion of capital in their margin trading accounts, investors can buy stocks where the margin is made up by securities firms. The stocks purchased by this means are usually registered under the securities firms.

The stocks lent by securities firms to investors may be owned by the securities firms or borrowed by them from other companies. Under the latter circumstances, securities firms must pay cash mortgages equivalent to the total market value of the borrowed stocks to lenders.

China: The threshold for securities firms and investors engaged in the margin trading and short selling business is very high.

Securities firms engaged in margin trading and short selling should have net assets of no less than 5 billion yuan ($720 million) within six months consecutively. The regulator also requires qualified securities firms to choose clients carefully based on the review of their financial status, trading experience and risk preference. Clients must have opened accounts for more than 18 months, the total assets value of their stock accounts must be more than 500,000 yuan ($72,000) and their total financial assets should be valued at more than 1 million yuan. The term for securities firms to lend money or stocks to investors should not be longer than six months.