Whether it is margin financing or securities lending or pledged purchase, it is essentially a loan business. Why can it generate huge profits in a relatively short period of time?
In the financial and financial business, financing is used by brokers to lend money to investors to buy stocks, and securities lending is used by brokers to sell stocks to investors. These two businesses require brokers to use their own capital and earn interest, and interest is higher than the bank's one-year time deposit rate. This just changed the single business model in which securities companies originally relied on brokers, investment banks and other channels to earn commissions.
In the author's opinion, the reason why the loan business can make the brokers earn enough money is mainly because brokers have used their own funds with a yield rate of only 2 to 3 percentage points to amplify this part of the rate of return through the loan business. At 8%, while profits have risen sharply, the risks borne by brokers have been relatively low.
However, in the face of strong demand for loan-like businesses, funding sources will gradually become the bottleneck for securities companies to develop the business.
As Wang Mingfei, a non-bank researcher at Orient Securities, said, due to regulatory requirements, the total size of corporate bonds and short-term financing bills issued by securities companies cannot exceed 100% of their net assets. As a result, a very small number of listed brokerage companies have advanced due to their business development. Money can be loaned to the point.
In fact, the margin financing and securities lending business is not without risk. Even in a very mature market abroad, margin financing and securities lending is a business with higher risks. It has higher requirements for investors' securities investment experience and risk bearing capacity and securities company's risk control level.
Therefore, the author believes that domestic brokerage firms should also avoid the potential risks in the two financial businesses when they enjoy the continuous source of profits from the two financing businesses. Such as leveraged securities lending transactions will be involved in the unique risk of leveraged transactions, forced liquidation risk, regulatory risks, as well as credit, legal and other risks.
First of all, margin financing and trading has the characteristics of leveraged trading. When investors participate in margin financing and short selling transactions, they not only face the risk of loss caused by misjudgment like ordinary transactions, but also investors must bear a certain percentage of the leverage involved in margin trading, which often leads to investment. The loss rate is further amplified.
Second, brokerage firms also have the risk of competing for customer resources. On the one hand, when the two financial businesses are in full swing, brokers and brokers, banks and brokers are bound to cause customers to compete. At present, the client transaction settlement funds of China's securities companies are deposited in third-party depository banks. The brokerage firms have somehow lost control over client transaction settlement funds. On the other hand, a few brokerage firms have not yet obtained qualifications for margin financing and securities lending business. , It may cause customers to transfer and compete among securities companies. For medium and small-sized securities companies that have not yet obtained business qualifications, it will have an even worse effect on their brokerage business.
In addition, in the margin financing and securities lending transactions, in addition to the ordinary trading commissioned trading relationship between investors and securities companies, there are still more complex claims and debts, as well as guarantees arising from creditor's rights and debts.
In order to protect their creditor's rights, a securities company monitors the assets and liabilities of investors' credit accounts in real time, and under certain conditions, it can enforce mandatory liquidation of investors' assets. However, the securities companies provide funds to customers for use, and may face the risk that the customers will not be able to repay the financing when they are due, even if the funds obtained after the closing of the pledged securities are still insufficient to repay the financing funds.
Third, there is a risk of out-of-control business scale, and liquidity risk arising from out-of-control business scale. In fact, brokerage firms provide investors with margin financing and securities lending business. Not only can they receive interest on margin financing and securities lending, but they can also receive trade commissions, which is more than a profit. However, brokerage firms often blindly expand the scale of margin financing and securities lending because they are pursuing higher profits, resulting in the risk of out-of-control business scales and the financial liquidity risk of brokers caused by out-of-control business scale.
In short, when brokerage companies rush around to scale up and speed up, they must not only actively play the role of capital intermediary, serve customer needs, improve customer stickiness, but also reasonably control the potential risks existing in the financial business.
