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(Original title: [In-depth] The long process of liquidation: the origin and destination of local gold exchanges)

In July, the Sichuan Provincial Local Financial Management Bureau issued a notice that Sichuanmonetary assetstradeThe company voluntarily applied to withdraw from the trading venue industry and will no longer engage in trading venue-related businesses. As a result, there are no longer any legal financial asset trading venues in the province.

In fact, since the beginning of this year, the adjustment of local financial trading platforms has been accelerating, and 18 provincial and municipal financial regulatory authorities have announced the closure of financial assets within their jurisdictions.Exchanges, and has completed three batches of centralized shutdowns.

Established in various placesGold ExchangeAt the beginning of its establishment, it was tasked with disposing state-owned assets, but it developed more disorderly during its growth, especially when cooperating with Internet finance, and it frequently collapsed. The fact that the gold exchange grew wildly for more than ten years and finally withdrew from the capital market is inseparable from the lack of a unified and clear regulatory system during its development.

The Decision of the CPC Central Committee on Further Deepening Reform and Promoting Modernization with Chinese Characteristics issued at the Third Plenary Session of the 20th CPC Central Committee clearly pointed out that it is necessary to improve the financial regulatory system, bring all financial activities under regulatory supervision in accordance with the law, strengthen regulatory responsibility and accountability, and strengthen coordination between central and local supervision. It is also necessary to build a safe and efficient financial infrastructure and unify the registration, custody, settlement and clearing rules and systems of the financial market.

Jiemian News reporters have confirmed through interviews with multiple parties that the fate of gold exchanges is nearing its end. Next, except for the Beijing Financial Assets Exchange, the remaining gold exchanges across the country will be cleared out one after another, or change their names, change their business scope, or directly cancel their registration.

Wild Growth of Gold Exchanges

Around 2009, local financial asset exchanges came into being to dispose of state-owned assets and transfer state-owned assets of financial enterprises.

The spring of financial exchanges began under the endorsement of the "Management Measures for the Transfer of State-owned Assets of Financial Enterprises" (Ministry of Finance Order No. 54) promulgated by the Ministry of Finance in March 2009. This document clearly stipulates that the transfer of state-owned property rights of non-listed financial enterprises should be conducted publicly in property rights trading institutions established at the provincial level or above in accordance with the law, without being restricted by region, industry, investment or affiliation.

In May 2010, the first national gold exchange, Tianjin Financial Assets Exchange, was approved for establishment. Since then, many places have begun to approve the establishment of gold exchanges or financial asset trading centers. Since their birth, most exchanges have state-owned backgrounds. Such local gold exchanges are supervised and managed by provincial people's governments and are given the mission of building a state-owned asset trading platform.

According to public information, the number of local gold exchanges in my country once reached 70, including 13 local gold exchanges and 57 local financial asset trading centers. As the number of exchanges approved for establishment increases, the business of gold exchanges is not limited to asset transfers and state-owned asset transactions, but also begins to undertake non-standard businesses such as municipal investment bond projects and cooperate with Internet financial companies.

In order to solve the financing problems of local enterprises, the gold exchange took on a large number of municipal bond projects in its early days.

Compared with the issuance in the interbank market, the municipal investment bonds issued through the gold exchange are non-standard products. Jiemian News reporters learned that the trading conditions and terms of non-standard products are simpler, there is a lack of unified online standards, and the investment risks are almost entirely placed on the underlying assets, leaving many hidden dangers for identifying and dispersing risks.

However, a person familiar with gold exchange business told Interface News reporters that most mainstream gold exchanges still focus on institutional business, with very few personal investment products. This is taken into consideration when it comes to business access because of their state-owned background.

At the end of 2014, Ant Financial became the founding shareholder of Zhejiang Internet Financial Asset Trading Center, and Internet finance companies began to cooperate with financial exchanges.

It is understood that a common model is that the mutual finance platform first lends money to the financing party, and the resulting debt is listed for transfer on the exchange. This can avoid the illegal behavior of the mutual finance platform directly transferring the debt; it can also split the large-value target projects registered on the exchange and package them intoFinancial productSold to individual investors on the cooperating Internet finance platform.

Another way is for Internet finance platforms to directly invest in financial exchanges. Around 2018, many Internet giants such as Ant and Baidu set up local financial exchanges. In addition to Ant, Baidu's Du Xiaoman Financial is the controlling shareholder of Xi'an Baijin Internet Financial Asset Trading Center.

According to Yingcan Consulting statistics, from 2015 to March 2017, more than 20 Internet finance platforms have cooperated with gold exchanges to launch products.

In 2017, regulators explicitly stopped the cooperation between Internet finance platforms and financial exchanges. The Office of the Leading Group for the Special Rectification of Internet Finance Risks required that illegal Internet platforms must stop cooperating with various trading venues to increase illegal and irregular businesses suspected of breaking policy red lines before July 15, 2017, and properly resolve existing illegal and irregular businesses.

Since 2011, the regulatory authorities have put a "tight ring" on gold exchanges from the very beginning. In 2011, the State Council issued Document No. 38, "Decision on Cleaning Up and Rectifying Various Trading Venues to Effectively Prevent Financial Risks", and the China Securities Regulatory Commission took the lead in forming an inter-ministerial joint meeting to clean up and rectify various trading venues. So far, the joint meeting has been held seven times.

However, the gold exchange really came into the public eye and became widely discussed, but it was accompanied by a series of explosive incidents.

The Qiaoxing bond incident in 2016 marked the breaking point of the sweet cooperation between Internet finance and gold exchanges.

In December 2014, two subsidiaries of Qiaoxing Group, Huizhou Qiaoxing Telecommunications Industry Co., Ltd. and Huizhou Qiaoxing Telecommunications Industry Co., Ltd., were registered with Guangdong Financial High-tech Zone Equity Exchange Center (hereinafter referred to as "Guangdong Equity Exchange") and successively issued 14 private placements.BondsThe principal and interest total 1.146 billion yuan.

It is worth noting that thesePrivate placement debtPackaged as financial products and sold on the Zhaocaibao platform under Ant Group, high-risk bonds are directly exposed to the investment vision of ordinary investors.

According to the regulations of the regulatory authorities, the total number of investors in each private bond issue shall not exceed 200, and there are tests and requirements for qualified individual investors in terms of assets, investment experience, and risk resistance. However, Zhaocaibao split the private bonds and packaged them into financial products, which violated the qualified investor standards in disguise, and used insurance companies as guarantees and credit enhancement, allowing many investors who do not have the ability to bear the risks of private bonds to invest directly, which violated the regulatory provisions.

Two years later, in 2016, Qiaoxing bonds defaulted, and all private bonds issued by two subsidiaries of Qiaoxing Group could not be redeemed when they matured, which implicated a wide range of people. The large-scale default of Qiaoxing bonds triggered the highest record of individual fines in the domestic banking industry. It is reported that more than 10 financial institutions involved in the case were fined a total of more than 2 billion yuan for illegal operations.

In December 2017, the former China Banking Regulatory Commission announced punishment measures against the banks involved in the Qiaoxing bond case.China Guangfa BankThe Bank and its other branches were fined and confiscated 722 million yuan, and administrative penalties were imposed on 13 investment institutions involved in the illegal guarantee case of China Guangfa Bank, with fines and confiscations of 1.341 billion yuan.

The compliance requirements and security risks of the issuance chain of "Qiaoxing Group-Guangdong Stock Exchange-Zhaocaibao-Investors" involved in the incident have been controversial in the market.

The long withdrawal

Less than two years after its establishment, the gold exchange encountered a cleanup policy issued by the regulatory authorities. In November 2011, the State Council issued the "Decision on Cleaning Up and Rectifying Various Trading Venues to Effectively Prevent Financial Risks", marking the beginning of the rectification and cleanup of the exchange.

The document clearly states that a system of "inter-ministerial joint conference for cleaning up and rectifying various types of trading venues" (hereinafter referred to as the "joint conference") will be established, led by the China Securities Regulatory Commission.

In July 2019, the regulatory authorities held the fourth meeting on the cleanup and rectification of exchanges in Beijing, requiring the cleanup of stock risks in various trading venues to be completed by the end of 2020. However, the cleanup work did not end as scheduled. At the end of 2020, the joint meeting held its fifth meeting, pointing out that the overall risk of non-standard debt instruments registered and listed for trading in gold exchanges is relatively high, and strictly controlling the number of trading venues has always been one of the focuses of the cleanup and rectification work.

In other words, the clearance is still ongoing.

In this regard, a person who once worked in a gold exchange in a province in North China told Interface News reporters that although the regulator had previously set a deadline for rectification and cleanup, it would not be stopped immediately. It still depends on the actual progress of the rectification and cleanup in various places. It is understood that some gold exchanges have a large scale of existing business.

Earlier media reports said that the CSRC extended the final cleanup deadline to June 2021.

Until March this year, four local financial regulatory departments, including Hunan Province, Liaoning Province, Xi'an City and Chongqing City, took the lead in issuing announcements to cancel the business qualifications of gold exchanges within their jurisdiction and no longer engage in financial asset trading venue-related businesses.

On May 10, the second batch of gold exchanges were shut down. The local financial regulatory authorities in five provinces and cities, including Shandong, Jilin, Jiangxi, Qingdao and Shenzhen, issued announcements to cancel the business qualifications of gold exchanges within their jurisdictions.

On June 21, financial management departments in eight places, including Tianjin, Shanxi, Heilongjiang, Henan, Guangdong, Hainan, Xiamen and Ningbo, issued a centralized announcement to close the last financial asset trading venue under their jurisdiction.

A person working for a central China-based state-owned capital holding company told Jiemian News that all financial asset exchanges are now facing rectification. Except for the Beijing Financial Exchange, no one is immune, and this news was verbally notified to all exchanges last year.

Interface News reporters checked the websites of several gold exchanges that are still in existence and found that there is a widespread phenomenon of slow updates.

Wang Shiqiang, a senior researcher at Bingjian Technology, said that in previous years, some assets traded on the gold exchange platform may have been long-standing and had a large stock, which required a certain amount of time to be cleared. In addition, some legal asset transactions also need to be taken over by new platforms, such as non-performing assets and inter-enterprise equity transactions.

What to do after the clearance?

"Now it's not about comprehensive withdrawal, but strengthening local management."

Xu Bei, secretary general of the Guangdong Small Loan Association, said that it is inaccurate to say that gold exchanges should be closed across the board. There is no document indicating that all of them should be closed, but local responsibilities must be clarified and local regulators should take on regulatory responsibilities. If they feel they do not have the ability to do so, they should close it down. Otherwise, the local governments will bear the responsibility themselves.

According to data disclosed by the China Securities Regulatory Commission, as of the beginning of 2019, the stock size of debt business of financial asset exchanges across the country still reached 851.7 billion yuan, involving approximately 1.2 million individual investors.

Some analysts pointed out that after the gold exchange is closed, the existing business will be transferred to local asset management companies, but it may also cause some asset management companies and municipal investment platforms to face increased overdue pressure on financing products listed on the gold exchange, and increase the overdue payment risk borne by investors.

Recently, a number of gold exchanges that were previously closed have changed their names and business tracks.

On July 2, Ningbo Financial Assets Trading Center Co., Ltd. was renamed "Ningbo Running Tiancheng Management Consulting Co., Ltd." and its business scope was adjusted to consulting and planning services.

Tianjin Financial Assets Exchange Co., Ltd. was renamed "Tianjin Wasu Price Appraisal Co., Ltd." and its business scope was adjusted to asset appraisal, information technology consulting services and other related businesses.

Some gold exchanges were also shut down in a hurry, leaving behind "time bombs".

Recently, an investor told Interface News reporters that he had recently received a notice from Zhongyong Zhuosheng Holdings Co., Ltd. (hereinafter referred to as "Zhongyong Holdings") stating that the wealth management products invested in the company are facing difficulties in repayment.

The Zhongyong Holdings staff member told the investor: "Recently, the country has centralized the closure of gold exchange businesses, and our company's exchange was also forced to close, business stopped, and accounts were blocked and unable to trade."

Zhongyong Holdings stated in a previous notice: In accordance with regulatory policy requirements, Shandong Stock Exchange will suspend all business from June 25, 2024. In order to protect the interests of all investors, the company immediately hired a professional institution to conduct due diligence on the relevant business after receiving the notice. The report will be completed before August 30, 2024. During this period, the company will release relevant updates from time to time.

Since its first establishment, the gold exchange has been active in the capital market for nearly 15 years, providing a platform for both investors and financiers in terms of non-performing asset transfers and non-standard business transactions. Many local financial asset exchanges or trading centers will be swallowed up in the tide of history.

“If we want to rectify and clean up, we have to repay, but some businesses cannot be settled, so they have been delayed until now. As for the gold exchanges that have completed the liquidation, the end of the existing business may be because it has been transferred out or there is no requirement to remove it from the balance sheet.” said a person familiar with the business of the gold exchanges.

Zheng Zhigang, professor at the School of Finance and Economics of Renmin University of China, believes that the demands of non-standard business itself exist. We have always advocated the establishment of a diversified and multi-level capital market to meet different demands. However, this trading venue must ensure transparency and safeguard the rights and interests of both parties. At present, it seems that the current gold exchanges do not have such functions, so in the future, how to provide such trading services, supervision needs to make new considerations.