The new brokerage would be founded in the near future following the merger of the Chongqing trust and investment firm's securities operations and two other Chongqing-based securities houses, the official told Reuters.

The two partners would be Chongqing Caizheng Securities Co and Chongqing Negotiable Securities Co, he said.

Details on the establishment of the new brokerage, to be named either Tongda Securities or Southwest United Securities, were still being discussed. The new brokerage still required regulatory approval, the official said.

``It will be set up soon,'' he said without giving further details.

China has ordered its trust and investment companies to divest their securities operations in a bid to curb financial risk.

China has only a handful of brokerages capitalised at1.0 billion yuan, including China Southern Securities, China Securities and China Guotai Securities.

Beijing, which has banned banks from pouring funds into the nation's highly risky stock market, is trying to expand the base of stable institutional investors.