China greenlights securities lending

The People's Bank of China, the country's central bank, said it would give the green light to securities lending as of November 20, the Wall Street Journal reported. The move could boost short-selling activity but market watchers expected liquidity to increase only gradually. Securities lending allows traders to borrow securities, backed by collateral and for a fee, from another trader. The move may indicate that the central bank is becoming more comfortable with volatile derivative products, the newspaper reported. Investors that buy and hold securities and traders who hesitate to take large bets dominate the bond market, the newspaper reported. The new rules may encourage liquidity in the market.