Core view:
On February 13, 2025, the regulations on the stock market making mechanism (hereinafter referred to as the “stock market making mechanism”) was officially introduced into the stock market making mechanism by the China Securities Regulatory Commission. On the same day, the Shanghai Stock Exchange issued the detailed rules for the implementation of the stock market making trading business of the science and Innovation Board of the Shanghai Stock Exchange (Draft for comments) and the stock trading business guide of the Shanghai Stock Exchange No. X – stock market making of the science and Innovation Board (draft for comments), and solicited opinions from the market from May 13 to May 28.
In the past three years since the opening of the science and innovation board, the relevant systems have been continuously improved. From the nearly three years since the opening of the sci-tech innovation board, looking back on the past three years, from November 5, 2018, when the General Secretary announced at the opening ceremony of the first China International Import Expo that “the Sci-tech Innovation Board will be established on the Shanghai Stock Exchange and pilot registration system”, to July 22, 2019, the first batch of 25 companies on the Sci-tech Innovation Board will be listed, and then to May 13, 2022, when the CSRC officially issued the pilot provisions on stock market making and trading business of securities companies on the sci-tech innovation board, the Sci-tech Innovation Board has developed from scratch and innovative systems have been implemented continuously, The exploration in the “experimental field” of science and innovation board has always been at the forefront. As of May 16, 2022, the science and innovation board has attracted a total of 420 science and technology enterprises to be listed, with a total initial fund-raising of nearly 600 billion yuan and a total market value of more than 4.6 trillion yuan.
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. 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%, which is slightly higher than 2.08% of the A shares on the main board of Shanghai Stock Exchange. 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 Q1 data of 2022, the growth of science and innovation board is much better than that of other sectors. Among them, the growth rate of revenue in 2021 is science and Innovation Board (37%) Beijing stock exchange (31.7%) gem (23.2%) main board (17.5%); Q1 revenue growth rate in 2022: Science and Innovation Board (45.8%) Beijing stock exchange (32.8%) gem (20.4%) main board (17.5%). In the future, under the background of the normalization of registered IPO, the market capacity of 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.
The market making business has higher requirements on the comprehensive business ability of securities companies, and the head securities companies are expected to become the first batch of participants. The qualification conditions for the pilot market maker of science and Innovation Board include: 1) the net capital in the last 12 months has been no less than 10 billion yuan; 2) Grade A or above in the last three years. From 2019 to 2021, there are 26 listed securities companies with qualified classification rating and net capital (or net capital at the end of 2020) of more than 10 billion at the end of 2021, mostly leading securities companies in the industry. The policy specifies that securities companies can use their own stocks, stocks borrowed from China Securities Fund or other stocks that have the right to dispose of as the source of market making securities, and the head securities companies with abundant securities pool will benefit more.
Investment suggestions we believe that with the implementation of the market maker system on the science and innovation board, market liquidity and trading activity are expected to improve. We suggest paying attention to leading companies of securities companies, securities it head manufacturers Hundsun Technologies Inc(600570) , China stock market news, Hithink Royalflush Information Network Co.Ltd(300033) , Shenzhen Fortune Trend Technology Co.Ltd(688318) , Fujian Apex Software Co.Ltd(603383) and high-quality leading companies on the science and innovation board.
The risk indicates the risk of policy change, and the liquidity is lower than the expected risk.
