A stone stirs thousands of waves. On Friday, the CSRC officially launched the DVP reform and solicited opinions from the market on the proposed revised Measures for the administration of securities registration and settlement. This weekend, the asset management circle is working overtime.
“Great, this reform can improve the current settlement system and prevent potential loopholes.” after noting the news of the launch of “DVP reform”, Hu Lifeng, general manager of Galaxy Securities Fund Research Center, forwarded and interpreted it for the first time.
A few hours later, up to this busy Sunday afternoon, we can still see many overtime interpretations from securities companies, funds, private placement and other market participants. Although “cash for goods” sounds professional and obscure, the general consensus in the industry is that this reform will help activate the vitality of the market and consolidate the basic system of the market.
overtime interpretation! A “brainstorming” in the asset management circle
The “DVP settlement system” led by China Securities Regulatory Commission and participated by China Securities Depository and Clearing Corporation is by no means an accident. Over the past decade, it has been common in financial academic works until the 2020 financial forum held more than a year ago.
On October 21, 2020, Yi Huiman, chairman of China Securities Regulatory Commission, disclosed that he actively and steadily optimized the transaction settlement system, enriched risk management tools, optimized the margin trading and refinancing system, and steadily promoted the reform of DVP settlement system.
Over the past year, the “DVP settlement system” has been steadily advancing. Until the evening of January 14, 2022, the CSRC officially disclosed the news that the CSRC started the DVP reform and solicited public opinions on the administrative measures for securities registration and settlement.
In Hu Lifeng’s view, at present, China’s securities market ensures that the brokerage and margin trading businesses involving individual investors have complied with the DVP system through the third-party depository, capital verification and securities verification before trading, and the settlement system is not perfect for the proprietary and custody businesses involving only institutional investors.
“This reform implements the securities law, draws lessons from international best practices, establishes the relationship between securities settlement and capital settlement for proprietary and custody businesses, and defines the disposal arrangements for breach of contract.” Hu Lifeng said.
A day later, on January 15, a report from the financial group of Huatai Research Institute circulated in the market. Shen Juan, Wang Ke and Wang Yu of the financial group made a professional interpretation of the reform released the night before.
This research report, entitled “sorting out the relevant reform of goods and bank payment and settlement provisions”, combed and commented in detail on the background, core changes, changes in settlement provisions, interest on settlement provisions and other matters of the reform.
In the view of Huatai financial group, the reform adopts the differentiated minimum settlement provision proportion settlement method. The applicable minimum settlement provision proportion of settlement participants = 70% multiplied by the differentiated minimum settlement provision proportion at the time of payment + 30% multiplied by the differentiated minimum settlement provision proportion at the time of withdrawal.
After this reform, the collection proportion of the minimum settlement provision for stock business will be reduced from the previous 18% to 15%. “On the whole, the new regulations reduce the requirements for settlement provisions to a certain extent.” Huatai financial research group finally reached this conclusion.
DVP reform will enhance investor confidence
“Let foreign capital come in better, good!” That night, some investors commented. However, some investors said they “read it again and didn\’t understand it!” And question “is it such a meaning to improve the efficiency of the use of market funds, reduce the occupation of market funds, pay money on the one hand and deliver goods on the other hand?”
On January 14, the financial associated press released the report “big moves in the securities market! The reform of goods and bank transactions was officially launched to improve capital efficiency, not affect individual investors, but more conducive to attracting overseas funds”. After the report, this professional obscure but far-reaching reform immediately triggered a heated discussion in the market.
For the impact of DVP reform, the CSRC stated in the official release that “this reform will keep the existing transaction settlement system and habits of investors basically unchanged and will have no impact on the majority of individual investors.”
However, this reform “is conducive to enhancing the security of the settlement system and further attracting foreign funds to enter the Chinese market”. At the same time, the reform simultaneously reduces the minimum payment proportion of settlement reserves of settlement participants, which is conducive to reducing the occupation of funds in the whole market and improving the efficiency of fund use.
Obviously, for ordinary investors, what they want to hear is not such a “professional interpretation”. The two day of the weekend, in the circle of friends, micro headlines, and some investors\’ official account, can find many “positive interpretation” of this reform.
This weekend afternoon, Citic Securities Company Limited(600030) in a regular strategy report, also mentioned the “goods and bank deal with reform”. There are six authors of this report, who interpret the recent market changes from different angles.
According to the professionals of Citic Securities Company Limited(600030) Research Institute, on January 14, China Securities Regulatory Commission announced the launch of the goods and silver deal reform in the A-share market, which is the last step of the four reform suggestions put forward by MSCI after the last round of improvement of A-share inclusion factors. They further believe that the reform of the capital market system is expected to promote overseas index companies to start the next step to improve the inclusion factor plan of A-Shares and further attract foreign capital inflows.
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