Innovation is the soul and the driving force of the development of the capital market. The Chinese capital market can hardly do without innovation in the course of its evolution and development for the past two decades, and even more on the road to maturity in the future. As the organizer of the capital market, the Shanghai Stock Exchange (SSE), following the requirements in the remarks by Chairman Guo Shuqing at the seminar on innovation and development of securities companies, actively supports the innovation and development of securities companies by dint of well-prepared organization and simplified procedures.
First of all, the SSE gives play to its organization ability for promoting the innovation of securities companies.
To stand by the innovation of securities companies, the SSE established the Product Innovation Committee with its leading official as Director early this year, under which several innovation working groups were set up according to the varieties of innovative products, specifically responsible for the innovation. To urge securities companies for the innovation, the SSE officials along with the group members initiatively paid visits to several securities companies for introducing them the working plan about innovation and listening to their opinions and suggestions. In the near future, the SSE will organize a symposium on innovative businesses of securities companies to carry on promoting the innovation.
Besides, the SSE simplifies the procedures for innovation to improve securities companies' efficiency in innovation.
According to the requirements of accelerating the innovation in new business and products at the seminar on innovation and development of securities companies, the SSE plans to speed up the professional evaluation and the pilot expansion for the collateralized quotation repo of bonds and the agreed repurchase securities trading business. It is drafting the conventional measures for quotation repo to standardize the business scheme. As for the collateralized repo of shares and other new business, the SSE plans to simplify the procedures for development, and accelerate the professional evaluation and the pilot expansion to improve the efficiency in innovation.
Moreover, the SSE launches product innovation to strengthen the innovation ability of securities companies.
Faced with the status quo that a great many SMEs and private-sector funds find it difficult to finance and invest respectively, the SSE goes all out to launch the innovation in products and business and propel the innovation and development of the capital market by exerting the functions of the capital market for better serving the real economy, bringing into play the capital market's functions in risk sharing and elimination for preventing risks in national economy, and enriching financial products for satisfying citizens' demands for wealth management.
Firstly, the SSE promotes quotation repo, supporting securities companies to provide clients with cash-based wealth management products.
Quotation repo refers to a kind of business that securities companies finance from clients by pledging its own bonds and making quotations (annual rate of return) according to different repo products, and return the raised funds and pay the quotation income to clients on the due date of repurchase.
Quotation repo, on one hand, enriches the investment channels of clients and enables the clients to use idle deposit for high yield and timely investment in securities. On the other hand, it not only slows down the loss of the deposit of securities companies' clients in the market correction, thus helping securities companies retain the clients, but also facilitates securities companies' gaining surplus investment income and enriching sources of business growth.
Quotation repo is now at the pilot stage. A total of 22 securities companies including Guosen Securities Co., Ltd. and Guotai Junan Securities Co., Ltd. have opened the pilot business, which has been well received by clients in the market. By the end of April, the value of accumulative quotation repo transactions has reached RMB169.6 billion and the number of registered investors amounted to 72,066 this year. The SSE is actively promoting the pilot expansion for quotation repo and formulating various optimization measures, such as simplifying the method of contract signing, loosening the requirements for clients' qualifications, elevating the investment proportion of bonds and adopting real-time in-and-out storage of bonds . The SSE will manage to open quotation repo on a regular basis this year.
Secondly, the SSE opens agreed repurchase, helping securities companies enhance their abilities to provide financing services for the real economy.
Agreed repurchase means that qualified clients sell underlying securities to the targeted securities company at an agreed price and agree to repurchase the underlying securities from the securities company at another agreed price on one day in the future.
Practically, shareholders with shares in a listed company need to hold the current shares unchanged and meanwhile have more demands for financing. Agreed repurchase can help these shareholders to solve the problem of being forced to sell equity assets for long-term investment due to the demand for short-term financing, thus enhancing securities companies' abilities to provide clients with financing services.
At present, CITIC Securities Co., Ltd., China Galaxy Securities Company Limited and Haitong Securities Company Limited as pilot units have opened agreed repurchase and achieved good results. By the end of April, the value of accumulative agreed repurchase transactions has reached RMB176 million and the number of registered investors amounted to 52 this year. To push forward the further development of agreed repurchase, the SSE plans to relax the restrictions on business scope and investment methods, expand the coverage, increase asset management plan and other transactional objects, extend the time for repurchase, loosen the restrictions on clients' qualifications, perfect the procedures for punishment on default, amend the business rules and promote the collateralized repo of shares upon research.
Thirdly, the SSE probes into the graded assets management plan, enriching the types of financial products offered by securities companies for clients.
The graded assets management plan of securities companies is to divide units into preferred, secondary and other units with different features of risks and returns. Preferred units enjoy agreed return while secondary units have the return on surplus assets in the pool plan. Expected return on preferred units is guaranteed by secondary units to protect the interest of investors for preferred units.
Securities companies' clients have large demands for investment in products with low risks, strong liquidity and short-term fixed income. They hope to use idle funds for investment in proper wealth management products when not involved in securities trading. As preferred units feature low risks and fixed income, the graded plan provides the clients with corresponding services, conducive to meeting the clients' demands for wealth management with idle funds. The new product will enrich the financial products and services provided by securities companies. With the aid of the graded plan, securities companies can offer clients more convenient and efficient investment products in a full coverage of different risk appetites, and enhance their competitiveness in the securities sector.
At present, some securities companies are setting about the research on the business scheme. The SSE together with some securities companies has discussed and improved the business scheme for the graded plan, and initiated the development of the platform for unit transfer.
FTSE Mondo Visione Exchanges Index:
Shanghai Stock Exchange Backs Up Innovation, Development Of Securities Companies
Date 28/05/2012