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Source: Securities Times

Just now, China Securities Finance Corporation released an analysis report on the suspension of securities lending.

On July 26, the analysis report on the suspension of securities lending released by China Securities Finance Corporation (CSFC) showed that the scale of securities lending had been declining steadily. As of July 24, after two weeks of suspension of securities lending (July 11 to 24), the scale of securities lending had dropped from 30.007 billion yuan to 20.803 billion yuan, a decrease of 9.204 billion yuan, or 30.67%.

At the same time, the stock business of individual stocks was settled in an orderly manner. After the suspension of securities lending for two weeks, 2,057 stocks were returned (i.e. bought), accounting for 91% of all the stocks with securities lending balances. The balances of the five stocks with the largest securities lending balances before the suspension decreased by an average of about 39%. The securities lending balance also decreased. After the suspension of securities lending for two weeks, the securities lending balance decreased from 31.851 billion yuan to 25.590 billion yuan, a decrease of 6.261 billion yuan, a decrease of 19.66%; the average daily securities lending sales amount decreased from 1.582 billion yuan to 1.107 billion yuan, a decrease of 30.03%.

In order to effectively respond to investors' concerns and maintain the stable operation of the market, the China Securities Regulatory Commission approved the application of China Securities Finance Corporation to suspend the securities lending business in accordance with the law. The suspension will be implemented from July 11, and the existing contracts must be settled no later than September 30. China Securities Finance Corporation has implemented relevant work requirements and steadily and orderly reduced the scale of existing stocks, and its counter-cyclical regulatory effect is gradually emerging.

The securities lending business refers to the securities finance company lending its own or legally raised securities to securities companies, which are then provided to clients for short selling. Since last year, the regulatory authorities have carried out multiple rounds of optimization of the securities lending business, including restricting strategic investors from allocating shares for lending, raising the margin ratio for short selling, reducing the efficiency of securities transfer for market-oriented agreements for short selling, and suspending the increase of the scale of short selling. At the same time, securities companies are required to strengthen the management of customer trading behavior, continue to increase the supervision and law enforcement of illegal and irregular behaviors such as improper arbitrage through short selling transactions, increase the margin ratio for short selling from no less than 80% to 100%, and increase the margin ratio for private securities investment funds participating in short selling from no less than 100% to 120%. After taking the above series of counter-cyclical adjustment measures, the scale of short selling and securities lending business has declined significantly.

Industry insiders believe that the counter-cyclical regulation adopted by the regulatory authorities on securities lending will help regulate market trading behavior, curb excessive market speculation, promote a more fair and rational market, ensure stable market operation, and effectively safeguard the interests of investors. This does not deny the role of securities lending. According to past practices, securities lending has obvious advantages in attracting funds into the market, calming irrational market fluctuations, and enriching long-short balance tools.

China Securities Finance Corporation stated that it will continue to implement counter-cyclical regulation requirements in the next step, coordinate with participating institutions to steadily and orderly reduce the inventory of securities lending, and maintain stable and healthy market operation.