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tomorrow, the first batch of 10 csi a500 etfs will be issued simultaneously, and the etf issuance war will begin.

at the same time, information obtained by the reporter of "daily economic news" shows that among the above-mentioned 10 csi a500 etfs, 9 adopt the securities settlement model, and only taikang csi a500 etf adopts the bank transaction settlement model.

in sharp contrast, when the 10 a50 etfs were first launched in early 2024, only the huatai-pinebridge csi a50 etf adopted the security settlement model.

9 csi a500 etfs adopt the bond settlement model

bond-binding etfs are hot again!

a document obtained by a reporter from the china business network shows that 9 of the 10 csi a500 etfs that will be launched on tuesday this week will adopt the security settlement model, rather than the 6 as previously reported by market news.

among them, the securities settlement broker of southern csi a500 etf is china galaxy securities, and the custodian is industrial and commercial bank of china. invesco great wall csi a500 etf also adopts the securities settlement model, with the securities settlement broker being citic securities and the custodian being industrial and commercial bank of china. as shown in the figure below, the custody agreement of invesco great wall csi a500 etf clearly stipulates that securities brokers are responsible for securities fund settlement business involved in securities trading on the fund exchange.

specifically, huatai securities and guotai junan securities both took on the roles of custodian and securities settlement broker. huatai securities is the securities settlement broker for both huatai-pinebridge a500etf and guotai csi a500etf, and is also the custodian of the latter. guotai junan securities is the securities settlement broker for harvest csi a500etf, and is also the custodian of huatai-pinebridge csi a500etf.

previously, data disclosed by the shanghai stock exchange showed that in the first seven months of 2024, in terms of the cumulative transaction volume of brokerage business etfs, huatai securities ranked first with a market share of 13.17%; guotai junan ranked third with a market share of 6.13%.

in addition, the securities settlement brokers of fuguo csi a500 etf, yinhua csi a500 etf, china merchants csi a500 etf and morgan csi a500 etf are zhongtai securities, gf securities, china merchants securities and guosen securities respectively, and the custodians are sdic securities, citic construction investment securities, industrial and commercial bank of china and ping an bank respectively. taikang csi a500 etf is the only fund in the first batch of products that adopts the bank transaction settlement model.

in sharp contrast, when the 10 a50etfs were first launched in early 2024, only huatai-pinebridge csi a50etf adopted the securities settlement model. the fuguo csi a50etf initiated and completed the conversion of the securities trading settlement model on the second day of the product's establishment.

bond-based etfs become the mainstream model

as etfs are an important product for investors to trade on the exchange, securities firms play a major role in the scale and liquidity of etf products.

on april 19 this year, the csrc issued the "regulations on the management of securities transaction fees for publicly offered securities investment funds" (hereinafter referred to as the "regulations").

the non-bank team of china merchants securities believes that the regulations are relatively protective and supportive of the securities settlement model, such as securities settlement funds are not subject to the upper limit of commission ratio distribution. in the short term, securities firms that adopt the securities settlement model for a large number of fund products are expected to retain a relatively high market share; in the medium and long term, securities firms with public fund custody qualifications have a certain first-mover advantage, but investment research capabilities are still the key to the competition for public fund commissions.

a senior investment researcher at a fund company said: "as far as etfs are concerned, bond-backed etfs will become the mainstream in the future."

wind data shows that since july 2024, a total of 52 new funds have adopted the securities settlement model, including the fuguo csi central enterprises dividend etf, dongcai sse 300 etf, wanzhong csi hong kong stock connect central enterprises dividend etf, dongcai csi 500 etf, and china merchants sse 300 etf.

a person from a securities firm told the reporter: "fund companies choose etf bond settlement more during the product's initial launch period, and they will have certain demands on the sales scale of the securities firm during the initial launch period. bond settlement etfs are often deeply bound to a single securities firm. when faced with market adjustments and product sales difficulties, the product sales pressure of the bond settlement securities firm will be very high, and there is a risk that the product will be difficult to establish. in addition, etf bond settlement has high requirements for the securities firm's system. it is necessary to purchase relevant trading modules from suppliers and pay related costs. if the etf product of the bond settlement target is a single market variety, then the expected trading volume brought by the bond replenishment will also be very small, and the resources brought to the securities firm will be limited. if the scale of bond settlement etfs cannot be increased, it may face the difficulty of not being able to cover the cost. at the same time, the subscription and redemption rules and trading links of etfs are more complicated than stocks and ordinary funds, requiring continuous system maintenance to avoid trading risks."

the brokerage official further pointed out that currently there are not many brokerages in the entire market that can support etf securities settlement. the implementation of the new commission regulations will also promote the securities settlement model, and it will still be a resource that all companies will actively strive for in the short term. in the long run, only by comprehensively considering the interests of brokerages, fund companies, and investors and adhering to the perspective of buy-side investment advisors can sustainable development be achieved.

a wealth management person from a shenzhen brokerage firm told the reporter: "after the new regulations, the cost-effectiveness of etf bond settlement is very low, and the value of custody is higher."

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