The three banks initiated talks earlier this year with Shanghai-based Xiangcai Securities Co, two sources told Reuters.
Foreigners are allowed to buy stakes of up to 33 percent in a Chinese securities house, but the sources, who asked not to be named, said the three banks had been lobbying Beijing for a majority stake in Xiangcai.
"Foreigners have asked to buy a major stake in Xiangcai, but the final result will depend on the government and regulator," said one source familiar with the matter.
Beijing is trying to clean up China's loss-making brokerage industry, crowded with more than 100 securities houses, with the aid of foreign capital and expertise even as it pursues efforts to foster viable capital markets.
The source said that of the three potential foreign investors, "CSFB is the most aggressive," adding that its talks were going smoothly so far.
"Unlike Citigroup and HSBC, so far CSFB has not got anything in China, so it is in a bigger hurry and the price for investing in a Chinese broker is still cheap now," the source said while declining comment on prospects for Citigroup and HSBC.
A spokesman for Xiangcai said the company was looking for a foreign investor but declined to name potential partners.
Despite Xiangcai's smaller size, analysts said it was attractive to foreign firms because it had relatively little debt and was the most internationalised broker, with existing ties to two foreign firms that might indicate it was more open to foreign management practices.
Xiangcai has a joint-venture investment bank with Credit Lyonnais' CLSA unit and also controls a fund venture with ABN Amro Holding NV.
According to KPMG, Xiangcai was the 16th largest securities house in China by income, including brokerage and underwriting fees, and it held a 2.01 percent in market share in 2004.
Xiangcai's net assets reached about 3 billion yuan ($371.6 million) in 2002, according to its Web site (www.xcsc.com).
Last month, Switzerland's UBS A.G became the first foreign firm to announce plans to win de facto management control of a Chinese brokerage by investing 1.7 billion yuan ($211 million) for 20 percent of Beijing Securities.
Sources said last week that J.P. Morgan was in talks with domestic brokerage Liaoning Securities, seeking to buy a stake over the current ceiling of 33 percent.
"The regulator is opening the door to foreigners who may think it's also a good time to invest in China's brokerages after their mad dash for Chinese banks," a source told Reuters.