On January 14, the CSRC officially launched the reform of cash against delivery (hereinafter referred to as DVP), soliciting opinions from the market on the proposed revised administrative measures for securities registration and settlement, and China Securities Depository and Clearing Co., Ltd. solicited opinions on the settlement rules and the administrative measures for settlement provisions (revised 2022).
DVP is a basic system widely used in the international market to ensure the full settlement of money and securities after securities transactions are completed. It has played an important role in principal risk prevention. The securities law stipulates that securities registration and settlement institutions shall provide net settlement services for securities transactions in accordance with the DVP principle.
The person in charge of relevant departments of the CSRC said that the reform is conducive to enhancing the security of the settlement system and further attracting foreign funds to enter the Chinese market. 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.
The Chinese reporter of securities companies learned that the reform does not involve brokerage and margin trading, and keeps the existing transaction settlement system and habits of investors basically unchanged, which has no impact on the majority of individual investors.
The marked securities can be sold normally or used to declare various non trading businesses on T + 1 day. As long as the settlement participant completes the capital settlement in time on T + 1 day, all its businesses will not be affected. Therefore, institutional investors, including managers of public funds and various financial products, QFII and rqfii managers, and proprietary business of securities companies, do not need to adjust their existing trading habits and trading strategies.
improve the institutional proprietary and custody settlement system
DVP means that in the process of settlement, the settlement of securities and funds is mutually conditional between the securities registration and settlement institution and the settlement participant. If and only if the settlement participant performs the obligation of capital settlement, the corresponding securities will be settled, and if the settlement participant performs the obligation of securities settlement, the corresponding funds will be settled. Generally speaking, it means “paying money with one hand and paying bonds with the other”.
At present, China’s capital market implements the settlement mode of “T-day securities transfer and T + 1-day capital settlement”. T-day securities transfer is unconditional transfer, and securities transfer is not linked to capital settlement. Brokerage and margin trading have achieved DVP effect through third-party custody, capital verification and securities verification before trading; The self operated and custody business of the institution is not included in the third-party depository, and its settlement system still needs to be improved.
On the basis of keeping the existing transaction settlement system basically unchanged, this reform establishes the relationship between securities and capital settlement by setting the “lock for sale settlement” logo, and forms a default disposal arrangement covering all businesses.
One of the key points of the reform is to improve the handling arrangements for capital settlement default and clarify the process for clearing participants to declare to China Clearing and mark the corresponding securities. The relevant person in charge of the asset custody department told the Chinese reporter of the securities firm that the relevant arrangements provided an institutional basis for settlement participants such as custody banks to strengthen risk management of customers, further strengthened the risk management ability of settlement participants and reduced the settlement risk of settlement participants.
has no impact on individual and institutional investors
The reform does not involve brokerage, margin trading and securities lending business, and the existing transaction settlement system and habits of investors are basically unchanged, which has no impact on the majority of individual investors.
The marked securities can be sold normally or used to declare various non trading businesses on T + 1 day. As long as the settlement participant completes the capital settlement in time on T + 1 day, all its businesses will not be affected.
Therefore, institutional investors, including managers of public funds and various financial products, QFII and rqfii managers, and proprietary business of securities companies, do not need to adjust their existing trading habits and trading strategies.
The Chinese reporter of securities companies learned from a number of securities companies that at present, the transaction settlement of most investors in the Chinese market has achieved the prevention and control effect of principal risk dealt with by goods and banks, and the reform has basically no impact on the market.
Shenwan Hongyuan Group Co.Ltd(000166) Chen Xiuqing, member of the securities Executive Committee, told the Chinese reporter of the securities firm that from the recently released business rules related to the cash versus payment reform, the reform established a clearer relationship between securities settlement and capital settlement by setting signs, and respected the existing transaction settlement habits of all parties in the market while enhancing the risk control ability of the settlement system, Especially the settlement habits of individual investors. For the brokerage, margin trading and securities lending businesses that have ensured that the settlement risk is completely controllable through the third-party depository, capital verification and securities verification before trading, this reform does not carry out marking, which means that the securities transactions of brokerage customers, including 190 million individual investors, are completely unaffected and do not need to be adjusted.
the proportion of settlement provisions was reduced by 3 percentage points
The DVP reform simultaneously reduced the minimum payment proportion of settlement provisions of settlement participants. In general, the proportion of reserves will be reduced from the current average of 18% to about 15%.
Previously, in December 2019, when China Clearing revised the management measures for settlement provisions (revised in 2019), it conducted a round of reduction of settlement provisions. At that time, China Clearing reduced the collection proportion of the minimum settlement provision for stock business from 20% to 18%, and improved the calculation and collection proportion of the adjustable minimum settlement provision of China Clearing in combination with the actual situation of the daily management and risk management of the settlement participants.
QFII and rqfii managers still collect settlement provisions according to the original method
it is worth noting that after the reform, QFII and rqfii managers still collect settlement provisions according to the original method.
The relevant person in charge of Huaxia Fund Operation Department said that institutional investors, including managers of public funds, private funds and various financial products, QFII and rqfii managers, and proprietary business of securities companies, do not need to adjust their existing trading habits and trading strategies because of this reform.
On the basis of no impact on investors, the cash against delivery system was established and matched, reducing the calculation and collection proportion of minimum settlement provisions, which not only improved the overall risk prevention and control of the market, but also improved the use efficiency of market funds.
In recent years, foreign investors have been paying more attention to China’s securities market. Foreign institutions and international index companies have put forward suggestions to further improve China’s settlement system.
Zhong Yongling, director of China Securities Service Department of HSBC, said that the launch of Huiyin counter reform has further consolidated the basic system of the capital market, improved the overall risk prevention and control ability of the market, met the expectations of foreign investors for the development of China’s capital market, and helped more foreign investors understand China’s capital market and enter China’s capital market, And even deeply participate in China’s capital market, so as to better serve the goal of promoting the high-level two-way opening of the capital market. It is a “reassurance” for market investors, especially foreign investors participating in China’s capital market.
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