With the formal implementation of the market maker system of the science and innovation board, some securities companies are eager to try. This week, Founder Securities Co.Ltd(601901) in the materials released for the 2021 annual general meeting of shareholders, proposed to apply for the market making business of the science and innovation board, which aroused the attention of the outside world. This is the first securities firm to mention the application for the business in the shareholders’ proposal after the official announcement of the market making system of the science and innovation board.
liquidity is expected to strengthen
On May 13, 2022, the CSRC officially issued the pilot provisions on stock market making trading business of securities companies on the science and Innovation Board (hereinafter referred to as the “market making provisions”), which will introduce the stock market maker mechanism into the science and innovation board. Subsequently, the CSRC will guide the Shanghai stock exchange to issue relevant business rules.
The market maker system of the science and Innovation Board was completed at the beginning of the year to solicit opinions, and officially implemented in March. It has been nearly two years since the launch of the sci-tech innovation board. It was first proposed on June 18, 2020. Yi Huiman, chairman of the CSRC, stated in the Shanghai Lujiazui Finance & Trade Zone Development Co.Ltd(600663) forum that “promote the inclusion of Sci-tech Innovation Board shares into the target of Shanghai Stock connect and introduce the market maker system”; On January 7, 2022, the CSRC issued the draft of market making provisions for comments, and then ended the consultation on February 6, 2022.
Compared with the draft for comments, the provisions on market making further strictly require the application conditions of market makers and clarify that the business qualification can be extended to other exchanges.
“The overall liquidity of the sci-tech innovation board is good, and its growth ranks first among all sectors. Based on the late development and absorbing the experience of mature capital market, the introduction of market maker system will help to further increase the liquidity of individual stocks and curb the sharp fluctuation of individual stock prices.” Wu Yanjing, chief analyst of the computer industry of Galaxy Securities and research leader of TMT / scientific innovation board, believes that, “Under the background of the normalization of IPO registration system, the market capacity of the science and Innovation Board will continue to expand, and the problem of tight liquidity of some stocks will gradually appear. Overseas practice shows that the market maker system is an important means to increase the liquidity of individual stocks and curb sharp price fluctuations. China has introduced the market maker system in the new third board in August 2014, which has accumulated experience for the smooth implementation of the market maker system of the science and innovation board.”
According to wind statistics, since the beginning of the year, the average turnover rate of the daily circulation market value of the science and innovation board is 2.45%, slightly higher than 2.08% of the A shares on the Shanghai Stock Exchange main board. The average daily turnover of individual shares is about 95 million yuan, and the total turnover of the science and Innovation Board accounts for 4.14% of the average daily turnover of the whole A shares. From the annual report data of 2021 and the data of the first quarter of 2022, the growth of the science and innovation board is much better than that of other sectors.
In fact, as early as August 2014, the new third board introduced the market making system, also trying to improve market liquidity. According to wind’s further statistics, since the introduction of the market maker system in August 2014, the trading volume of the new third board has increased rapidly, accounting for more than 50% of the market making turnover by February 2015. Superimposed on the bull market in 2015, the market activity reached a new height. From October 2015 to September 2016, the total turnover increased by 97% year-on-year.
securities companies are eager to try
The heavy asset business of Chinese securities companies is mainly self operated business, which needs strong financial support. In addition, the heavy asset business dominated by directional strategy fluctuates greatly affected by the market. Since the deepening reform of the capital market in 2019, the direction of heavy asset business has changed. Among them, market making belonging to non directional business can smooth the performance fluctuation and improve the market liquidity, or it may become the profit growth point of securities companies in the future.
This time, Founder Securities Co.Ltd(601901) in the proposal, it was introduced that in May 2022, the CSRC officially issued the pilot provisions on stock market making trading business of securities companies on the science and innovation board, introducing the market maker mechanism on the basis of competitive trading on the science and innovation board. Therefore, Founder Securities Co.Ltd(601901) plans to apply to the regulatory authorities and carry out the market making trading business of shares on the science and innovation board.
As for the necessity of carrying out the stock market making trading business of the science and innovation board, Founder Securities Co.Ltd(601901) analysis shows that the company’s carrying out the stock market making trading business of the science and innovation board can broaden the company’s business scope, increase business types, disperse business risks, enhance differentiated competitiveness, improve the company’s overall anti risk ability, broaden business income channels and improve shareholder returns, and the company can better participate in the pilot reform of the capital market.
In fact, after the release of the pilot provisions (Exposure Draft) in January 2022, all major securities companies in China have begun to prepare to apply for this business.
At present, the qualification conditions for the pilot market maker of the science and Innovation Board include: the net capital in the last 12 months has been no less than 10 billion yuan; Grade A (inclusive) or above in the last three years. There are 26 securities companies that meet the above “hard” indicators at the same time.
Orient Securities Company Limited(600958) said that the market making of the science and innovation board filled the gap of the non market making trading system of A-Shares (previously, there was only a market making system in the fields of bonds, commodities, ETF and the new third board), and it is expected to be promoted to other sectors of A-Shares after its operation is mature. Making a market in the equity market is of great significance to securities companies. It will not only enrich the choice of de directionalization of proprietary business, but also effectively reduce the volatility of proprietary investment performance and improve the stability and toughness of the overall performance of securities companies.
Market participants said that in the past three years since the opening of the sci-tech innovation board, the Sci-tech Innovation Board has developed from scratch, innovative systems have been implemented continuously, and the exploration in the “test field” of the Sci-tech Innovation Board has always been at the forefront. Reporter Liu Yang
