Adjustment and optimization of securities lending related systems is conducive to activating the market and boosting confidence

The securities lending system ushered in reform and again sent a positive signal.

On October 14, the CSRC made targeted adjustments and optimization to the system of stock lending and allotment of shares by strategic investors. On the premise of maintaining relative stability of the system, the securities lending and allotment of shares by strategic investors were tightened in stages.

On the same day, the Shanghai and Shenzhen Stock Exchanges issued the Notice on Optimizing the Arrangements for Securities Lending Transactions and Refinancing Securities Lending Transactions (hereinafter referred to as the Notice), which further refined the relevant rules. The increase in the margin ratio for securities lending came into effect on October 30, and other provisions came into effect on October 16.

Tian Lihui, president of the Financial Development Research Institute of Nankai University, told the Securities Daily that the optimization of the securities lending system has increased the cost of securities lending, restricted the behavior of insiders in securities lending, and demonstrated the responsibility and action of the regulators to strengthen "counter cyclical regulation" while respecting the market.

Lending securities and lending both ways

Previously, topics such as "strategic investors refinancing and lending restricted shares", "senior executives' restricted shares lending and participating in securities lending in disguised form to reduce their holdings" and many market participants had called for a ban on investing in restricted shares and increasing illegal share reduction.

From the optimization content of the securities lending system, it mainly covers the securities lending end and the lending end. At the securities lending end, the lower limit of margin ratio for securities lending will be raised from 50% to 80%, and the margin ratio for private securities investment funds participating in securities lending will be raised to 100%. The margin ratio of stock securities lending contract shall still be subject to the original provisions. At the lending end, the special asset management plan set up by senior executives and core employees of listed companies through participation in strategic placement will be canceled, and the lending mode and proportion of other strategic investors at the initial stage of listing will be moderately restricted.

Increasing the margin ratio of securities lending means that the cost of securities lending transaction will increase. Dong Zhongyun, chief economist of AVIC Securities, told reporters: "By increasing the margin ratio, the cost of securities lending transactions will be increased, and securities lending transactions will be tightened to reduce the risk of market fluctuations."

Tian Lihui also held a similar view: "The increase in margin ratio for securities lending will increase short selling costs, thus guiding securities companies and quantitatively reducing transactional short selling operations, and improving value oriented buy sell and long-term holding."

The Soochow Securities Research Daily believes that the increase in the margin ratio of securities lending is expected to form a good cooperation with the reduction of margin, which is conducive to further promoting the balance between the market and the short, stabilizing the fluctuation of investor sentiment, and driving the stability and recovery of market confidence.

In addition, differentiated and standardized securities lending by strategic investors is conducive to stabilizing the pricing of new shares and promoting executives of listed companies to focus on their main businesses. In Dong Zhongyun's view, "restricting strategic investors from lending restricted shares to prevent the stock price from falling sharply due to short selling on the first day of IPO, which is conducive to stabilizing the stock price after IPO and curbing the high premium issuance of new shares. The prohibition on the refinancing of restricted shares by senior executives and key employees of listed companies can reduce the source of securities lending and the risk of short selling, on the other hand, make senior executives no longer reduce their holdings in disguised form, focus more on the main business of the company and focus on the long-term development of the company. "

Market confidence is expected to recover

With the deepening of trading side reform, a series of measures have been introduced, such as adjusting stamp duty, further strengthening the crackdown on illegal share reduction, and optimizing the securities lending system, which are of positive significance for boosting the current market confidence.

Previously, the issue of lending restricted shares to participate in securities lending was also responded by the regulator. The Notice clearly states that "if an investor holds shares of a listed company that are subject to restrictions on transfer, such as restricted shares, strategic allotment shares, and shares of a major shareholder or a specific shareholder that are transferred in block trading, he or she may not sell shares of the listed company through short selling during the restriction period."

"The optimization of the securities lending system is still the point of view of the trading side reform." Chen Li, chief economist of Sichuan Finance Securities and director of the research institute, said that, in particular, the restriction war on the lending of restricted shares, the issuance of "prohibition orders" on the refinancing of restricted shares of listed companies' executives and core employees, will further standardize the reduction of holdings and related transactions.

Tian Lihui also said that the cancellation of measures such as the loan of special asset management plan set up by senior executives and core employees of listed companies through participation in strategic placement will help prevent insider trading, enhance corporate cohesion, reduce the lack of market confidence, and is expected to help the market gradually move out of the bottom area.

Judging from the trading volume of securities lending in the current year, it is expected that the adjustment of the securities lending system will have limited impact on the market trading volume. Wind data shows that as of October 12, the balance of securities lending in the whole market was 87.905 billion yuan, accounting for only 5.41% of the balance of two financing, and 0.13% of the circulating market value of A-shares. At the same time, since this year, the daily average sales of securities lending have reached 5.295 billion yuan, accounting for only 0.59% of the daily average turnover of A-shares.

However, some securities companies with large securities lending scale and quantitative private placement may be affected to some extent. Dong Zhongyun explained that "the adjustment of the margin ratio of securities lending has increased the cost of securities lending transactions, which has an impact on both securities dealers and quantitative private placement, especially for the quantitative private placement with a large scale of securities lending." But in the long run, it will help guide the rational distribution of securities sources, curb speculation, and promote the stable and healthy development of the market.

In addition to the reform of the system, strengthening the investigation and punishment of violations has also become the focus of supervision. The CSRC made it clear that "it will strengthen the supervision of all kinds of improper arbitrage behaviors, tighten the system fence, further strengthen the supervision and law enforcement, and investigate and punish one of all kinds of violations, and impose severe punishment."

key word: lend bond market investor