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Starting from July 22, 2024, the margin ratio for short selling will be officially increased from no less than 80% to 100%.

In addition, after the CSRC approved China Securities Finance Corporation's application to suspend securities lending business in accordance with the law, the balance of securities lending in the A-share market further declined rapidly.

Wind data shows that as of July 18, the balance of A-share margin lending has dropped to about 29.5 billion yuan, a new low in the past four years.

It is worth noting that as an important lender of the securities lending business, with the end of the disclosure of the second quarterly report of public funds in 2024, the latest scale of securities lending through ETFs has surfaced. Wind data shows that since many fund companies announced the suspension of the scale of new securities lending through ETFs in February this year, the securities lending business of ETFs has declined significantly. As of the end of the second quarter of this year, the scale of securities lending through ETFs in the entire market was only 5.957 billion yuan, a sharp drop of nearly 92% compared with the end of last year.

The margin ratio for securities lending has been raised

The securities lending business of refinancing refers to the business in which a fund lends securities to China Securities Finance Corporation through the comprehensive business platform of the stock exchange at a certain rate, and China Securities Finance Corporation returns the borrowed securities and corresponding equity compensation and pays the fees upon maturity.

On July 10, the CSRC approved China Securities Finance Corporation's application to suspend its securities lending business, which will be implemented from July 11, 2024. Existing securities lending contracts can be extended, but must be settled no later than September 30. At the same time, the CSRC approved the stock exchanges to increase the margin ratio for securities lending from no less than 80% to 100%, and the margin ratio for private securities investment funds participating in securities lending from no less than 100% to 120%, which will be implemented from July 22, 2024.

This means that the margin ratio for short selling will be increased from July 22, 2024.

The China Securities Regulatory Commission stated that margin trading is one of the important basic systems of the capital market, which plays a positive role in stabilizing irrational fluctuations, promoting long-short balance and price discovery, and attracting medium- and long-term funds to the market. Based on the actual needs of the development of the domestic securities market and centralized supervision, my country established the refinancing system around 2013. On the one hand, it provides the necessary sources of funds and securities for margin trading business; on the other hand, it also provides a means for regulatory authorities to grasp the business development, strengthen daily supervision, and take counter-cyclical adjustment measures in a timely manner.

The balance of securities lending continued to decline rapidly

Wind data statistics show that the balance of securities lending has generally shown a downward trend since the beginning of this year.

After the China Securities Regulatory Commission approved China Securities Finance Corporation's application to suspend its securities lending business in accordance with the law and implemented it from July 11, 2024, the size of the securities lending balance in the A-share market further declined rapidly.

Data shows that as of July 10, the balance of securities lending was about 30 billion yuan, but as of July 19, the balance of securities lending had dropped to about 26.4 billion yuan, a cumulative decrease of more than 3 billion yuan in just a few trading days.

At the beginning of this year, the balance of securities lending in the A-share market was more than 100 billion yuan, which means that the current balance of securities lending is only about 1/4 of that at the beginning of this year.

As of July 19, there were 23 stocks with margin trading balances exceeding 100 million yuan, and the number of individual securities with balances exceeding 100 million yuan decreased significantly compared to July 10 (when there were 30).

Looking at specific securities, as of July 19, the top ten stocks with the largest securities lending balances were Pianzihuang, Wantai Biological, Haiguang Information, United Imaging Healthcare, Bank of Nanjing, BAIC Blue Valley, Aimei Technology, Longi Green Energy, Vanke A, and Aier Eye Hospital, with securities lending balances of 340 million yuan, 264 million yuan, 255 million yuan, 241 million yuan, 236 million yuan, 208 million yuan, 196 million yuan, 192 million yuan, 187 million yuan, and 185 million yuan, respectively.

According to the information announced by the China Securities Regulatory Commission on July 10, the existing securities lending contracts can be extended, but must be settled no later than September 30. This means that the balance of securities lending in the A-share market may further decrease in the future.

ETF lending decreased by 90% in half a year

Since the China Securities Regulatory Commission announced the suspension of securities lending, securities lending transactions in the Shanghai and Shenzhen stock markets have been declining continuously. As an important lender in the securities lending business, exchange-traded funds (ETFs) have also attracted market attention with their every move.

Recently, the disclosure of the second quarterly report of public funds in 2024 has ended, and the latest scale of ETF securities lending has surfaced. Wind data shows that since many fund companies announced the suspension of the scale of new securities lending in February this year, the ETF securities lending business has declined significantly. As of the end of the second quarter of this year, the scale of ETF securities lending in the entire market was only 5.957 billion yuan, a decrease of more than 90% compared with the end of last year.

Relevant fund companies revealed to Securities Times reporters that since February, the company has strictly implemented the relevant requirements of the China Securities Regulatory Commission on securities lending business, suspended the scale of new securities lending through transfer and financing, and is steadily promoting the gradual settlement of the existing securities lending through transfer and financing to ensure the smooth operation of related businesses.

Source: Nancai Express (Editor: Bi Fengzhi) from China Securities Regulatory Commission, Securities Times (Reporter Hu Huaxiong), Securities China (Reporter Pei Lirui)

SFC

Editor of this issue Jiang Peipei Intern Huang Lihong

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