Text / Qian Linyu, assistant general manager of the system operation headquarters of Orient Securities Co., Ltd
Chen Jing, System Operation Headquarters of Orient Securities Co., Ltd
In recent years, with the continuous deepening of the reform of the capital market, institutional investors have gradually become the dominant force. Financial institutions, including insurance companies, fund companies, bank wealth management companies, QFIIs, etc., have strong financial strength, professional investment teams and rich investment experience, which can better resist market risks and achieve long-term and stable investment returns. Different types of institutional investors have different characteristics and advantages and play different roles in the capital market. While they are showing diversified development, they have also put forward more demand for the capital market. For example, domestic institutions are gradually participating in the international market and sharing high-quality assets and investment opportunities in the world, and more and more foreign institutional investors are entering the mainland capital market, providing domestic investors with more choices. The institutional integrated services of securities companies aim to provide institutional clients with a full range of capital market solutions to meet their needs in investment and financing, such as investment banking, asset management, trading business, research services, etc.
With the support of important policy documents such as the "Fintech Development Plan 2022-2025" and the "Three-Year Improvement Plan for Network and Information Security of Securities Companies (2023-2025)", we will continue to promote the digital transformation of securities companies, optimize business processes, improve service experience, reduce operating costs, innovate business development methods, and enhance risk prevention and control capabilities through the application and innovation of financial technology.
As a comprehensive securities company approved by the China Securities Regulatory Commission, Orient Securities aims to provide all-round, one-stop professional and comprehensive financial services for various financial institutions through digital transformation. The following will take Orient Securities as an example to talk about the practice of digital construction of institutional customer service of securities companies.
Fintech "Arms Race" Brought by Institutional Transaction Services
Since 2004, domestic securities companies began to implement centralized trading business, with the database as the core of the brokerage trading system came into being, the scattered in the technical system of the business department trading business, market information, capital management, clearing and settlement, risk control and authority control into a system, to achieve the centralized and unified management of securities transactions. The services provided to institutional customers are similar to those of retail customers, focusing on the traditional service model of trading and business handling, and have made certain explorations in subdivisions such as order management and account management, such as Hang Seng order management system. The public fund customer group adopts the rent-seat model, and the demand for quantitative investment strategies has just started, mostly focusing on low-frequency transactions, mainly relying on arbitrage, hedging, and multi-factor strategies to make profits, and traditional centralized transactions can still cover service needs.
In 2015, with the listing of CSI 500 index futures, it provided more room for the development of quantitative funds. With High-Flyer, Yanfu, Zhicheng Zhuoyuan, Qilin and other representative quantitative private equity institutions, with high-frequency alpha strategies, they have achieved a continuous upward trend in performance. Traditional centralized counters have been stretched thin in terms of quantifying customers' speeds of transactions and responding to personalized needs.
Orient Securities is also facing the personalized, systematic and fast needs of institutional customers at the trading level, so it has opened a breakthrough road through cooperative development and independent research and development. In 2016, distributed technology was introduced to deepen the new generation of trading system, and in 2018, the self-developed ultra-fast trading system was launched to build a new quantitative trading model integrating institutional counter trading system, real-time risk control and ultra-fast market. The speed market triggers the strategy system to generate a trading request and complete the speed trading system through the offer service. In order to meet the needs of institutional customers for the ultimate speed of bidding, high-availability trading nodes are deployed in multiple data centers to make offers for spot, financial and futures transactions.
The extreme requirements of high-frequency quantitative customers for transaction speed make the competition of brokerages more "futures", "spell" trading system, "spell" hardware equipment, "spell" deployment scheme, "spell" trading terminal, "spell" technical services, and also form a "business + technology + service" institutional service model. At this stage, institutional services are more of a test of the information construction ability of brokers.
Institutional trading services are infinitely expanding to the needs of institutional customers
In 2019, there were many major events, such as the China Securities Regulatory Commission (CSRC) in January, which issued the Notice on Matters Concerning the Conversion of the Securities Trading Model of Newly Established Public Fund Managers, encouraging fund managers to adopt the brokerage settlement model for trading when issuing new fund products. Subsequently, the guidelines for the refinancing of public funds were issued, the underlying shares of the two financial institutions were expanded, the restrictions on the foreign shareholding ratio of securities companies were abolished, the pilot work of stock index options was expanded, and the CSI 300 ETF option contracts listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange were approved. With the implementation of various market policies and the deepening of institutional trading services, the service groups and service needs faced by securities companies have undergone tremendous changes.
1. The "new" bond settlement model shows the rudiments of integration advantages
According to the requirements of the new regulations of the China Securities Regulatory Commission, securities companies serving public funds, insurance companies, commercial banks, futures asset management and other financial institutions, for various products managed by newly established public fund managers, the original custodian bank settlement, leasing securities company seats (trading units) trading mode has been changed to the brokerage settlement model. Orient Securities seized the opportunity to establish a special public fund trading system in a timely manner, provide all kinds of market conditions, support stocks, funds, ETFs, Hong Kong Stock Connect, bonds and other full trading varieties, provide comprehensive and reliable transaction risk management, implement independent trading, independent clearing, independent version management, and meet the security management needs of sensitive data of public investment transactions.
Synchronize the supporting business middle platform, establish an exclusive operation team, and provide a series of comprehensive services such as the design and implementation of transaction settlement schemes, account opening, fund depository, investment platform docking, transaction management, clearing and settlement, product custody and valuation.
Under the new settlement model, the coordinated development of wealth management product sales, investment trading, and custody business has been driven, and the advantages of the integration of brokerage resources have been fully utilized.
2. The services brought by different types of institutions are full of flowers
(1) Digital construction of institutional wealth management services. Since 2021, the competition among fund distribution agencies has become increasingly fierce, and the AMAC announced the list of the top 100 fund distribution agencies in the third quarter of 2023, with 24 banks, 53 securities firms, and 21 independent fund distribution agencies on the list, with securities companies accounting for half of the seats, and the ToB distribution business of securities companies plays a pivotal role in it. The service institutional customers include public funds, private equity funds, insurance companies, trust companies, banks and bank wealth management sub-bank financial institutions, as well as listed and unlisted enterprises.
Orient Securities has actively deployed on the road of wealth management business transformation, and is the first in the industry to launch an exclusive service terminal for institutional wealth management to explore digital services for institutional wealth management. Provide institutional customers with a dedicated institutional wealth management service platform integrating account services, financial operations, pre-investment research, post-investment management, asset allocation and risk compliance, fully meeting the investment needs of institutional investors. At the level of customer demand, for institutional customers who are accustomed to using asset management systems such as public funds and insurance companies, the Orient Securities Easy Connect system is provided with the company's fund distribution platform to connect with the electronic interface between the asset management system and the fund distribution platform of securities companies, so as to facilitate investment managers to choose investment funds among many fund products, standardize the transaction process and asset management (as shown in Figure 1).
Figure 1 A one-stop wealth management service platform for institutions
(2) Digital construction of investment and research services. As the services for institutional trading and institutional wealth management customers expand in depth, investment research services have gradually become the core competitiveness of wealth management of securities companies. However, point-to-point offline services can no longer meet the breadth and depth requirements of investment research services, and the output of systematic and standardized research services can improve customer stickiness and become a general consensus in the industry. The establishment of the investment research system effectively solves the problem of dynamic service and timely access.
Orient Securities has built a digital investment research platform, and outputs investment research results by integrating multi-dimensional data and investment research tools. The platform supports multi-dimensional data of stocks, commodities, derivatives and fund products, and uses model tools such as comparative analysis, intelligent backtesting and evaluation schemes to generate investment research results including portfolio allocation and post-investment tracking analysis, and all kinds of data are presented in a structured way. Researchers and investment managers provide a basis and scientific guarantee for investment decisions through systematic screening, analysis and research. The digitalization of investment research services not only provides the general functions of institutional customers, but also meets the personalized needs, expands the service radius, improves the overall customer experience, and empowers the transformation of wealth management.
(3) Multi-point parallel development of institutional digital services. At the institutional business level, in addition to the above-mentioned trading services, financial services, investment research services, etc., Orient Securities also has a comprehensive layout of digital construction in the advantageous business FICC business, foreign exchange business, custody business and other aspects.
On the basis of the increasingly mature FICC industry chain, we will integrate large wealth management and build a "full-asset domestic and overseas sales and trading platform" to create the first one-stop comprehensive financial service platform for all assets at home and abroad in China. With the help of modern financial technology means, we will take the in-depth exploration of the all-round needs of domestic and foreign institutional and corporate customers as the entry point to promote the collaboration and cooperation of different business lines at home and abroad.
Through the construction of financial technology, it provides professional custody and outsourcing services for institutional customers, builds a manager service platform, and builds a fast and safe information exchange channel between Orient Securities and the manager, so that the manager can conveniently handle account management, fund transfer, registration, instruction management, information disclosure and other businesses 24 hours a day, 7 × a day. Build an investor service platform to dynamically and directionally release product-related information to meet investors' query needs for information such as asset status, net share value, transaction details, and credit disclosure reports. With an advanced information platform, we keep up with market changes and regulatory policies, quickly respond to customer requirements, meet personalized needs, and support the high-quality development of various businesses.
3. Sublimation of institutional customer demand services to institutional comprehensive services
From point to point, in the track of the institutional line, various securities companies are actively arranged. However, with the continuous deepening of institutional digital services in all aspects, especially the popularization of innovative technologies such as cloud computing, artificial intelligence, and large language models, it is becoming more and more difficult to build advantageous barriers, and the marginal benefits are gradually decreasing.
Securities companies have sought a path of development, institutional services have entered a period of integration, and individual information technology services have been upgraded and iterated to the digital construction of comprehensive institutional services. Orient Securities is also moving forward in exploration, improving its overall service capabilities through business synergy, resource integration, and the establishment of a professional service team.
In 2021, Orient Securities launched the "Institutional Service Platform" (Figure 2) to establish a unified service portal for institutional customers, optimize the customer center, reshape the operation and control center, and empower the coordinated development of various businesses by integrating comprehensive service resources and technological capabilities such as account opening, business handling, financial services, and brokerage services. Externally, it provides a unified service portal and professional terminals, and internally as an integrated service platform for institutional operations, providing institutional customers with full-chain professional and comprehensive services.
Figure 2 Institutional service platform
Unified service portal. The institutional service platform integrates various business services, takes customers as the center, and establishes a one-stop comprehensive service digital system for institutional customers. One external brand, one internal customer, improve customer service quality and satisfaction, and strengthen the business brand of the institution. At present, the platform provides comprehensive services such as institutional wealth management, institutional brokerage, and institutional collaboration for eight categories of customers: enterprises, brokers/futures asset management, private equity funds, insurance and insurance asset management, public funds, trust companies, banks and bank wealth management subsidiaries, and financial companies.
Customer Center. By sorting out the current situation of each business, the company establishes account data standards and account models, defines interface protocol standards, and uses technical means to optimize the customer center and form a unified view of oriental customers. For the same customer in different business lines, unique identity identification, account classification management, and customer panoramic view are built. Solve the compliance problem of business isolation, meet the company's strategic synergy, as well as the diversified financial service needs of customers, empower the coordinated development of business, and strengthen customer-driven service support.
Fulfillment centers. With the expansion of institutional customers, operational manpower has gradually become a bottleneck, seriously affecting business development. The establishment of the operation center connects customers and relevant personnel within the brokerage, and customizes the standard application template and approval process according to different business requirements to improve operational efficiency. In addition to the online and digitization of business handling, it also sorts out the seats and parameters of on-exchange, over-the-counter, options and other transactions, and integrates and outputs various reports and statements required by customers, which is conducive to the monitoring of risks by operation personnel, and clearly obtains and analyzes business data, laying a good data foundation for further improving the overall service of the institution.
Collaboration Center. Institutional services are not a simple integration of services, on the basis of integrating the underlying data and opening up various business processes, the ultimate goal is to achieve cross-marketing and business collaborative development. Relying on the nationwide marketing network of securities firms, the collaboration center conducts intelligent due diligence on institutional customers, explores business opportunities, and promotes data-empowered business development. Analyze potential business opportunities through the daily business development information of institutional customers, support business collaborative reporting, carry out cross-departmental business cooperation management, and promote the implementation of business cooperation, support closed-loop business development functions such as business opportunity adaptation, business opportunity tracking, business opportunity conversion, follow-up service follow-up, and continuous exploration of new business opportunities, support cross-departmental collaborative income distribution query and statistics, and share institutional account information, product cooperation and transaction information within the scope of compliance by docking with other systems of the company.
The digitalization of institutional business services is not something that can be achieved overnight. The fragmentation of the organization's business has its own reasons, such as regulatory compliance requirements and the company's existing assessment system, which will affect the advancement of service integration. Whether it can facilitate institutional customers and achieve effective development of business synergy at the same time tests the comprehensive strength of each securities company. Only by jointly advancing the construction of awareness, mechanism and science and technology can we achieve efficient collaboration, rapid response and dynamic expansion. At the same time, empowering business and empowering development is the essence of scientific and technological construction, grasping the core, taking institutional customers as the main body, and reducing costs and increasing efficiency, and innovating and developing through the digital thinking and digital intelligence construction capabilities of the professional service team.
The road is long and resistant, the line is coming, and the future can be expected if the line is not stopped. It is hoped that the digital practitioners of each organization's business services can unite knowledge and action and achieve far-reaching results.
(This article was published in the second half of March 2024)