Recently, some interim measures for China Depositary Receipts (hereinafter referred to as CDR) of Shanghai and Shenzhen stock exchange were issued. The Interim Measures optimize the trading system and introduce the mixed trading system of competitive market makers under the bidding trading system. Qualified securities companies can apply to become CDR market makers.
It is understood that the conditions for applying for CDR market maker are not complex. First, it is necessary to have the qualification of securities market making trading business; The second is to have more than 3 years of international securities business experience. The number of single CDR market makers shall not be less than 3. If a single CDR market maker applies for less than 3 or more but still fails to meet the market demand, the exchange may designate a market maker to carry out market making business.
“It is expected that in the future, when the number of CDRs increases and the trading volume increases, the business may thicken the performance of securities companies,” a large securities company in the North told reporters.
CDR market making trading is a market making system officially introduced by Shanghai and Shenzhen stock markets. At the beginning of this year, the science and Innovation Board also publicly solicited opinions on the introduction of the market making trading system, but it has not been officially released yet. From the perspective of soliciting opinions, the requirements of market makers on the science and Innovation Board may be higher.
market makers should have more than 3 years of experience in international securities business
It is reported that the provision of bilateral quotation and other services by market makers will help to increase market liquidity and market depth, improve the ability of price discovery, promote reasonable market pricing, guide market participants to invest rationally and provide necessary protection for investors.
“Considering the time zone difference between domestic and foreign stock exchanges, investors have limited familiarity with overseas issuers, and there is still a process of familiarity with the product characteristics of CDR. The introduction of market maker mechanism in interconnected CDR business is of great significance to the healthy development of the market,” the exchange said.
If a securities firm meets the requirements for market making, it can apply to the exchange for market making according to the provisions. Market makers must meet the two conditions of “having the qualification of securities market making trading business” and “having more than 3 years of international securities business experience”.
The exchange can determine the number of market makers to be introduced according to the business development and market demand. If the verified securities companies exceed the number of market makers to be introduced, the exchange will organize a comprehensive review, select market makers from the verified securities companies and announce them to the market.
A market maker shall apply to the exchange for market making business on one or more specific CDRs. The exchange shall determine the list of market makers of each CDR according to the application of market makers to carry out market making business on specific CDRs, and announce it to the market.
It is understood that the number of single CDR market makers should not be less than 3. If a single CDR market maker applies for less than 3 or more but still fails to meet the market demand, the exchange may designate a market maker to carry out market making business.
If a market maker voluntarily applies to terminate the CDR market making business in the exchange, it shall not re apply within 6 months; If a market maker voluntarily applies to terminate the market making business for a specific CDR, it shall not re apply for the market making business for the same CDR within 6 months. If a market maker is terminated from carrying out CDR market making business, it shall not apply again within one year.
Market makers shall promote the company’s research team to release securities research reports on CDRs and their underlying stocks involved in market making.
The exchange may, according to the monthly specific CDR market making evaluation results of market makers, give appropriate transaction fee reduction and incentive to market makers who actively perform their market making obligations, and terminate the CDR market making business of market makers under the circumstances specified by the exchange according to the monthly comprehensive evaluation and annual comprehensive evaluation results of market makers.
When engaging in CDR market making business, market makers shall strictly abide by domestic laws, relevant provisions of exchanges and market making agreements; Establish and improve the information isolation system to prevent the conflict of interest between market making business and other businesses; It is not allowed to take advantage of the opportunity of engaging in market making business to engage in illegal acts such as insider trading and market manipulation, or seek other illegitimate interests.
sci tech innovation board market making business may also launch
The CDR market making business rules have been officially issued. In addition, the market making business rules of Kechuang board may also be officially released in the near future.
In January 2022, the CSRC issued the pilot provisions on stock market making trading business of securities companies on the science and Innovation Board (Exposure Draft) (hereinafter referred to as the “exposure draft”), which plans to introduce the market maker mechanism into the science and innovation board. At present, the regulation has not been officially released.
In terms of access conditions for market makers on the science and innovation board, the exposure draft puts forward higher requirements. The pilot securities companies need to meet the requirements of capital strength and compliance risk control ability, including the continuous net capital of no less than 10 billion yuan in the last 12 months and the classification rating of class A or above in the last three years. In addition, the initial pilot securities companies also have perfect business plans, professionals, technical systems and other requirements.
According to Western Securities Co.Ltd(002673) statistics, the net capital in the last 12 months has been no less than 10 billion yuan and the classification rating in the last three years has been above class A (inclusive). There are only 28 securities companies such as Citic Securities Company Limited(600030) and so on.
Securities traders said that market makers take the bid ask spread as the main source of income, which is conducive to improving the robustness of securities business performance and will also promote the transformation of securities companies’ proprietary business to market making trading business. In addition, the market maker system is conducive to the improvement of market liquidity and price discovery function, further improve the financing capacity and efficiency of the science and innovation board, and then bring more business opportunities to the contracting end of investment banking projects of securities companies. At the same time, it also helps to improve the service viscosity of existing market making customers of science and innovation board.
at present, the new third board also has a market making trading system. Data show that there are 93 market making securities companies on the new third board. From 2014 to 2022, the top five securities companies in the number of market making stocks are Zhongtai Securities Co.Ltd(600918) , Guotai Junan Securities Co.Ltd(601211) , China Industrial Securities Co.Ltd(601377) , Kyushu securities and Citic Securities Company Limited(600030) South China
As of March 29, 2022, the top five securities companies in the number of market making stocks are Kaiyuan securities, Northeast Securities Co.Ltd(000686) , Kyushu securities, Shenwan Hongyuan Group Co.Ltd(000166) , and Anxin securities.
Citic Securities Company Limited(600030) said in the annual report of 2021 that in 2021, the company’s new third board business continued to adhere to the basis of customer expansion and coverage, with value discovery and value realization as the core. While actively carrying out the recommendation and underwriting business of the Beijing stock exchange, insisting on optimizing the market making position structure and increasing the coverage of high-quality enterprises, we attach great importance to quality control and effectively control business risks. By the end of the reporting period, the company had provided market making services for 31 listed companies, of which one company had become a listed company of the Beijing stock exchange and 23 companies had entered the innovation layer.
