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all market-wide refinancing securities were officially cleared.

on september 30, csi financial released data on refinancing and margin financing and securities lending. as of september 27, the balance of refinancing and securities lending dropped to 0. this means that all existing securities refinancing business in the market has been closed.

on july 10 this year, the china securities regulatory commission announced the suspension of the securities lending business, stipulating that existing securities lending contracts can be extended and the margin ratio of securities lending transactions further increased, but they must be closed no later than september 30.

regarding the original intention of suspending the securities lending business, the regulator stated that in order to effectively respond to investor concerns and maintain stable market operations, after fully assessing the current market situation, we will further strengthen the countercyclical adjustment of securities lending, and gradually implement extensions and separation arrangements for old and new securities in accordance with the law. the securities refinancing business is suspended.

in addition to the clearing of stock refinancing and etf refinancing, how are the two financing businesses changing? according to csi financial data, the balance of securities lending has also dropped sharply. as of september 27, the balance of securities lending in the entire market was only 9.794 billion, which was a significant decrease from the previous peak of 100 billion. financing is the only remaining business in the two financing businesses.

clearance of securities refinancing business

the securities refinancing business has been officially launched as a pilot since february 28, 2013. this suspension and the closing of the stock means that this business that has been developed for more than 11 years has pressed the pause button.

the so-called refinancing business refers to a business in which major shareholders of listed companies, fund companies and other institutions that hold stocks lend them to speculators through securities companies to sell them. the launch of the securities refinancing business has expanded the scale of the securities lending business, allowing securities companies to lend securities to institutional investors such as funds and social security funds through securities finance companies, and then provide securities lending and short selling to margin financing and securities lending customers.

the securities refinancing business provides a tool for balancing long and short positions, and has also experienced rapid development, with the historical peak scale once reaching 180 billion. however, the securities refinancing business has certain short-selling characteristics. in a rising market, it has the effect of calming stock price fluctuations. however, in a volatile and declining market, it can easily lead to speculation of short selling.

in response to market concerns, the scale of refinancing continued to decline after regulators repeatedly imposed restrictions on refinancing. on july 24 this year, csi financial corporation disclosed data showing that the refinancing of securities was suspended for two weeks (from july 11 to 24), and the scale of securities refinancing dropped from 30.007 billion yuan to 20.803 billion yuan, a decrease of 9.204 billion yuan. , a decrease of 30.67%; at the same time, the balance of securities lending fell simultaneously. after suspending the refinancing of securities for two weeks, the balance of securities lending dropped from 31.851 billion yuan to 25.590 billion yuan, a decrease of 6.261 billion yuan, a decrease of 19.66%.

in the securities refinancing business, fund companies are also important participants. on june 14, 2019, the china securities regulatory commission issued the "guidelines for publicly offered securities investment funds to participate in refinancing securities lending business (trial)", which stipulates that closed period stock funds, partial stock hybrid funds, open stock index funds and relevant feeder funds and strategic allotment funds can participate in the securities lending business of refinancing, and the income from etf refinancing and securities lending will be included in the fund assets.

however, in practice, etf refinancing lending is more common. data show that at the end of 2023, 264 etfs carried out refinancing securities lending, with a total lending scale of 73.022 billion yuan, accounting for more than 90% of the total market fund lending. in february this year, etf refinancing became the target of market criticism. fund companies participating in refinancing issued statements one after another, suspending the new lending scale of refinancing securities and steadily promoting the gradual closing of the existing lending scale of refinancing securities.

as of this year’s second quarter report, there are only 19 etfs left in the market with 5.957 billion yuan in refinancing securities. in just half a year, the scale of etf refinancing has dropped by more than 90%.

on september 30, the market-wide securities refinancing business returned to zero.however, according to regulatory standards, the business is suspended, which means that it is still possible to restart at the appropriate time.

controversial, securities refinancing has been restricted many times in the past year

since the market's sharp monthly correction in august last year, businesses such as quantification and securities refinancing have been pushed to the forefront. major shareholders have "short-selling" through securities lending, fund companies have "short-selling" etf component stocks, and "securities re-financing has increased by 170 million per day." stocks" and other false news continue to spread in the market, and regulators have repeatedly come forward to clarify the rumors.

even when the china securities regulatory commission completely suspended the securities refinancing business and gradually closed down the existing business, in august this year there were still "foreign media said that the refinancing data were all fictitious" and "there is actually no upper limit on the amount of securities lending sold", etc. rumors spread. subsequently, the public security organs investigated and dealt with in accordance with the law and found that the foreign media did not publish relevant reports, and the information was maliciously fabricated by liu, a self-media operator, and used to attract fans and illegally make profits. the local public security organs have punished relevant personnel in accordance with the law and instructed online platforms to take measures to deal with relevant accounts.

also since last year, based on market conditions and investor concerns, the china securities regulatory commission has taken a series of measures to strengthen the supervision of securities lending and refinancing businesses, including restricting the lending of shares by strategic investors, increasing the margin ratio for securities lending, and reducing securities refinancing. the market-oriented agreement declares the efficiency of securities transfers, suspends the scale of new securities lending, and simultaneously requires securities companies to strengthen the management of customer trading behaviors and continue to increase the supervision and enforcement of illegal activities such as improper arbitrage using securities lending transactions.

taking this year as an example, supervision continues to tighten on the refinancing business. as early as january 29, the china securities regulatory commission required a comprehensive suspension of restricted stock lending; starting from march 18, refinancing transactions were converted from t0 to t +1.

subsequently, the china securities regulatory commission issued the "opinions on strictly enforcing issuance and listing access to improve the quality of listed companies from the source (trial)", which mentioned in the regulations on "effectively preventing detours and shareholding reductions" that prohibit major shareholders, directors, senior executives are prohibited from participating in derivatives transactions with the company's stocks as the subject matter, and it is prohibited to refinance and lend restricted stocks, or to sell restricted stocks through securities lending, and to prevent the use of "tools" to bypass holding reductions. supervision has long had relevant regulations on the refinancing and lending of restricted stocks. from the perspective of the industry, the regulatory standard this time has been clearly changed from "suspension" to "prohibited", which also completely plugs the loopholes in the refinancing and lending of restricted stocks.

by march 15, securities lending of restricted stocks was directly suspended. on march 15, the china securities regulatory commission issued the "opinions on strengthening the supervision of listed companies (trial)", which for the first time explicitly prohibited major shareholders, directors, and senior executives from participating in derivatives transactions with the company's stocks as the subject matter, and prohibited restricted shares. refinancing and lending, shareholders of restricted shares are required to borrow and sell securities, and prevent the use of "tools" to reduce holdings.

on july 10, supervision of the securities refinancing business was tightened. first of all, the china securities regulatory commission approved the application of china securities financial company to suspend the securities refinancing business in accordance with the law, which will be implemented from july 11, 2024. existing securities refinancing contracts can be extended, but must be closed no later than september 30. secondly, starting from july 22, stock exchanges were approved 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 was increased from no less than 100% to 120%.

with the implementation of a series of regulatory measures, the scale of securities lending and refinancing has continued to decline, and the proportion of daily securities lending sales to a-share turnover has been declining day by day. the impact on the market has been significantly weakened, creating conditions for the suspension of the securities refinancing business. therefore, supervision has once again made adjustments and clarified the legal extension and separation arrangements for existing businesses, which will help prevent business risks and maintain the stable and orderly operation of the market.

the china securities regulatory commission stated that it will adhere to a problem-oriented and goal-oriented approach and always give top priority to maintaining institutional fairness and improving the inherent stability of the market. at the same time, based on market conditions, daily supervision and counter-cyclical adjustments will be strengthened, and illegal activities such as improper arbitrage will be severely cracked down to ensure the stable operation of the market and effectively safeguard the interests of investors.