Margin trading refers to the business activities in which a securities company lends funds to customers for them to buy securities or lend securities for them to sell, and collects collateral.
Stock pledge financing refers to the pledge of the pledgee with the stock (equity) owned by the pledgee as the subject matter of the pledge. The equity pledge of a listed company refers to the pledge of the equity held by the shareholders of the listed company to a securities company or other entity, usually for the purpose of financing.
The main differences between margin financing and stock pledge financing are as follows:
1. The subject matter obtained is different
Margin trading can be financing or securities lending, through financing and then buying stocks to enhance the power of the multi-party, securities lending refers to borrowing securities and then selling securities, enhancing the power of the short side;
Stock pledges can only raise funds, not short sales.
2. The use of funds is different
The funds obtained through margin trading are usually used to purchase listed securities, which increases the liquidity of the securities market and, under certain conditions, accelerates the function of value discovery in the securities market;
The funds obtained from the stock pledge may not be used to purchase listed securities, but may be used to develop the company's main business. For specific financing entities, the state will have certain requirements on the use of the funds it raises. For example, the funds obtained by a securities company through stock pledge financing can only be used to make up for the lack of liquidity, and cannot be diverted for other purposes.
3. No collateral
The collateral in margin trading can be either stocks or cash;
The main purpose of a stock pledge is to obtain cash, so the collateral cannot be cash, but must be a security.
4. The main body of capital and financing is different
Margin trading operates differently from country to country. For example:
Under the market-oriented decentralized credit model in the United States and the specialized credit model in Japan, the intermediaries who lend funds include securities companies and securities finance companies, but the final lenders of funds are usually banks.
The operation mode adopted by the mainland stipulates that the direct subject of financing is the securities company, that is, the securities company uses its own funds and securities to provide financing and securities lending to customers; At the same time, a system has been established for securities finance companies to provide refinancing to securities companies.
Stock pledge financing is generally handled by banks, pawnshops and other institutions, and there is a clear difference between financing entities and margin financing and securities lending
5. The leverage ratio is different from risk control
Generally speaking, margin financing has a higher degree of risk controllability than stock pledge financing.
Since the funds or securities obtained on margin are recorded in a dedicated account, it is relatively easy to monitor changes in their market value, calculate the level of risk, and request margin calls. The leverage ratio of margin trading can be adjusted according to the situation, and the leverage ratio can be appropriately increased when the overall risk of the market is not large, and it can be tightened otherwise.
Stock pledge financing is essentially a pledged loan, and although the use of funds may be restricted, it is obviously much more difficult to monitor, and when the market value of the stock falls, the risk of borrowing claims increases.
Margin trading
1. The opening conditions are mainly as follows:
(1) Be at least 18 years old and have full capacity for civil conduct.
(2) The ordinary securities account is required to engage in securities trading in the company for no less than 6 months, that is, the account must be opened for 6 months.
(3) The average daily assets of 20 trading days shall not be less than 500,000 yuan.
(4) The evaluation time is within 2 years, and the customer risk assessment questionnaire is C4 or above.
(5) Individuals or institutions with good reputation who are not on the company's credit business "blacklist".
(6) Non-shareholders and affiliates of the Company.
Note: Only one margin account can be opened, and if it is opened in securities company A, it cannot be opened in securities company B.
2. Financing long
Financing long refers to borrowing money from a securities company to buy stocks when the stock price is low, thinking that the follow-up is bullish, selling it when the stock price is high, and returning the principal interest to the securities company at maturity.
For example, when the stock price is 10 yuan, an investor borrows 200,000 yuan from a securities company to buy 20,000 shares, and sells it when the stock price rises to 20 yuan in the later stage, and gets a price difference of 200,000 yuan. In addition to the stock transaction fee paid, the principal and interest returned to the securities company are the profits of investors.
However, in this kind of operation, if the stock price does not rise in the future, but continues to fall, then even if the investor sells the stock, it is not enough to repay the principal and interest of the securities company, and he needs to make up for it with his own money.
3. Short selling
Investors believe that a certain stock will fall in the future, so they borrow a certain stock from a securities company and then sell it. Wait until the stock price really falls in the future, and then buy the corresponding number of shares at a low price and return it to the securities company.
For example, a stock is now 30 yuan, and investors believe that the stock will fall to about 10 yuan in the future. So he borrowed securities from a securities company, lent 1,000 shares of the stock, and sold them in the market at 28 yuan a share, obtaining 28,000 yuan. The subsequent stock price continued to fall, and when it fell to 10 yuan, the investor bought 1,000 shares, spent 10,000 yuan, and returned the 1,000 shares to the securities company.
After this operation, the investor earned a price difference of 18,000 yuan, and then deducting the interest that needs to be paid for securities lending, which is the investor's profit, which is very considerable. In addition, investors need to pay trading commissions and interest on securities borrowing, and the proportion of these fees can be negotiated with the brokerage.
However, if the stock price does not fall in the future, but rises, then when the contract expires, it will be necessary to invest more money to buy back the securities and return them to the securities company, so there will be a loss situation.
4. Risks
(1) Leveraged trading risk
Margin trading uses leverage, and the risk of investors suffering losses due to errors in judgment will be further magnified with leverage. In addition, investors are required to pay financing interest on financing to buy securities, and securities borrowing and selling securities are subject to securities borrowing and lending fees, which are still payable in the event of investment losses.
(2) Forced liquidation risk
During the period of margin trading, if an investor fails to repay the debt within the agreed period, or if the price fluctuation of the listed securities causes the ratio between the value of the collateral and its margin debt to be lower than the maintenance guarantee ratio, and the collateral cannot be added at the agreed time and quantity, the investor will face the risk of the collateral being forced to liquidate by the securities company.
(3) Risk of early settlement of transactions
During the period of margin trading, if the investor's assets are subject to property preservation or compulsory enforcement measures by the judicial authorities due to his own reasons, or if there is loss of civil capacity, bankruptcy, dissolution, etc., or if the scope of the underlying securities is adjusted, the trading of the underlying securities is suspended or the listing is terminated, the investor will face the risk of being terminated by the securities company in advance.
(4) Interest rate risk
During the period when investors engage in margin trading, if the benchmark interest rate of financial institutions for the same period stipulated by the People's Bank of China is raised, the securities company will increase the financing interest rate or securities lending rate accordingly, and the investor will face the risk of increased margin financing costs.
Stock Pledge Financing:
1. Positive:
If the company lacks funds to increase its competitiveness, develop its main business or carry out new projects, it is good news that major shareholders pledge financing to expand production scale.
If the pledged shares are tradable, the demand from investors remains unchanged, which means that the supply exceeds demand, which is also good news.
2. Negative:
If a listed company pledges shares, it is only to solve financial problems, pay employees' salaries, pay off debts, etc. This kind of pledge situation is not conducive to the development of the company and the rise of stock prices, which is bad news.
If the majority shareholder pledges the equity in order to cash out. Shareholders will reduce their stock holdings and cause the stock price to fall, which will affect the investment confidence of retail investors, while the pledge of major shareholders will not affect the stock price movement. When the pledge expires, they may unpledge it, or they may simply let the bank close the position.
Or to avoid reducing holdings beyond the restricted period. The shares of major shareholders are generally limited to sale, after which they will reduce their holdings, and these provisions are avoided through equity pledges, and the funds obtained from the pledge may be invested in other industries.
Generally, the higher the stock pledge rate, the higher the risk, the maximum proportion of equity pledge shall not exceed 60%, and shareholders with an equity pledge ratio of more than 50% shall not exercise their voting rights, and try to avoid buying stocks with too high pledge rate.
The pledge rate is too high, which indicates that the company is in urgent need of cash, and its risk is high, which will cause investors in the market to sell a large number of stocks in their hands, which will lead to a decline in stock prices.