Futures Trading Software-Maker Seeks Shenzhen IPO

Chinese derivatives trading software provider Webstock Information Systems Co. Ltd. has applied for an IPO on Shenzhen’s Nasdaq-style ChiNext board, its second attempt to list its shares there.

The Shenzhen Stock Exchange on Friday received Webstock’s listing application. The company plans to issue no more than 13.34 million shares, or no less than 25% of its enlarged total shares, according to the company’s initial copy of prospectus (link in Chinese) released on the exchange’s website.

Webstock’s IPO plan came as Chinese regulators accelerate efforts to expand the derivatives market to meet investors’ growing demand for hedging tools.

Out of the funds raised from the IPO, the company plans to use 195 million yuan ($30 million) to develop a quantitative investment system, 173 million yuan to develop a new asset management system, 156 million yuan for its research department, and 129 million yuan to replenish liquidity.

Webstock operates third-party software for individual and corporate investors to trade derivatives products. The company provides computer software and a mobile app, which report futures quotes and deliver industry research reports.

In December, there were 628,900 monthly active users of Webstock’s computer software and 1.3 million users of its mobile app, the prospectus showed. The company said it provided services to more than 135 futures firms in China by the end of last year, or over 90% of such firms in the country.

Prior to the current listing attempt, Webstock had applied for an IPO on the ChiNext board in 2015. But the application was terminated in 2018, because, some media reports said, Webstock used CN First International Futures Ltd., one of its affiliates, to help domestic customers engage in trading foreign derivatives products, which violated China’s foreign exchange regulations.

Founded in Hong Kong in 2011, CN First International Futures is controlled by Shang Shouzhe with a 90% stake, the prospectus showed. Shang is general manager, chairman and actual controller of Webstock.

By the end of 2020, Webstock had 309.7 million yuan in total assets, up 9.5% from a year earlier. The company reported 75.8 million yuan in net profit on revenue of 192.1 million yuan last year.

China has pledged to develop its derivatives market for domestic and foreign investors who have long complained about the insufficiency of hedging and derivatives instruments. Last week, the country launched crude oil options on the Shanghai International Energy Exchange, the first in the energy sector available to foreign investors. That provides a “good supplement” for oil companies that mainly use crude oil futures for hedging in China, an official said.

China’s lawmakers are also deliberating on the country’s first law specifically for the domestic derivatives market. Although titled the Futures Law, a draft recently made available for public comment covers a broader range of derivatives, including options.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Lin Jinbing (jinbinglin@caixin.com)

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