Hong Kong brokers, "accidents" one after another! What happened?

Around the National Day this year, the A-share market staged a continuous rise in the "short-selling" market, resulting in huge losses for many counterparties of many Hong Kong securities firms and the inability to recover insurance, and the situation that they could not be redeemed.

The reporter verified from investors that the Hong Kong securities firms that cannot be redeemed for the time being include Opple International (OPH), Dongxin Securities, Long-term Securities, Southern Huifa, Lion Group, Qingshi Securities, etc.

Brokerage China reporters exclusively learned that recently, a number of brokerages have sent preliminary treatment plans to customers. According to the notice, some brokerages are actively taking action to raise funds by recovering from counterparties, borrowing money, and introducing investors; Some brokerages said that they will gradually return funds in the near future.

Many brokerages were unable to redeem the payment

"September 30 is the last trading day before the holiday, I placed an order before September 30, the market was particularly good at that time, and the brokerage was still collecting option premiums on September 30. At 4 p.m. on September 30, I received notices from Opple International, Southern Huifa and other brokerages one after another, saying that all our derivatives positions would be cleared according to the closing price on September 30, and liquidated according to the closing price on September 30 after liquidation, and then the premiums and earnings would be refunded. Investor Mr. Zhou (pseudonym) told the brokerage China reporter.

"We, as holders, have been waiting for this. According to the normal plan, they should have refunded us the premium last week, but they didn't receive the money. According to Mr. Zhou, he lost nearly 3 million yuan in option premiums (premiums).

The reporter learned that, like Mr. Zhou, there are not a few investors who bought individual stock options in Hong Kong but were passively liquidated by the brokerage and had no way to return their money, and there are currently several rights protection groups of nearly 500 people. Another individual investor said that he received a 20% refund of the premium on the evening of October 14.

"In the Mainland, individuals are not able to participate in OTC derivatives trading of individual stock options. But the tool of individual stock options is still good, Hong Kong allows individual investors to participate, I didn't expect that the brokerage does not talk about martial arts, our option premium has been paid, and he collects money when he loses money; When it comes to making money, the platform runs away. The investor said.

A senior derivatives person told the brokerage China reporter that the thunder was caused by some small Hong Kong brokerages. According to him, the demand for individual stock derivatives in Hong Kong is relatively large, due to the strict domestic supervision and the low suitability requirements of Hong Kong customers, such as individuals can trade if they meet the PI (professional investor). Secondly, these securities companies set up by mainland institutions or individuals in Hong Kong have a low compliance bottom line and lack of risk control, and they have sold individual stocks and vanilla options, and they have not hedged. In addition, in the past few years, these small brokerages have had a trend of bad money driving out good money.

In the view of the above-mentioned people, this risk event has impacted investors' trust in these small Hong Kong brokers, and in the future, such small brokerages will withdraw from the over-the-counter derivatives industry, which requires high capital and professionalism.

A number of brokerages notified customers of the initial treatment plan

Brokerage China reporters received notices from investors from several Hong Kong brokerages to customers. On the whole, due to the recent extreme market conditions in the financial market, many counterparties of many Hong Kong brokerages have suffered huge losses and cannot be insured, resulting in the dilemma of not being able to redeem. A number of brokerages said they are actively taking action to resolve the issue and will start the refund process in recent weeks.

(Brokerage notice, photo provided by investors)

For example, OPH LPF informed investors on October 14 that "we understand your concerns about the recent return of funds that customers are concerned about, and we have actively promoted the progress of relevant work." Due to the complexity of the transaction data and the long time required to accurately calculate the difference between the option premium and the earnings, we plan to start a gradual return of funds in November 2024. ”

According to him, the scope of refund includes the refund of option premiums and the treatment of income differences. The order of refunds will be based on the time of payment by the customer, with priority given to the earlier customer. At the same time, the company will process the difference in earnings in batches according to the results of the clearance transaction and the actual income situation, and the specific amount will be notified to the customer after the data is calculated. The agency is currently in close communication with multiple funding providers, and it is expected that the final refund rate and amount will be determined in the coming weeks.

"We understand the anxiety of some clients during the waiting process, but once again remind all clients that the way to solve the problem should be legal and compliant." We are actively advancing the fund return program, and any misconduct may affect the overall progress and may create unnecessary legal risks. ”

Changchang Securities informed investors on October 10 that "as a licensed institution in Hong Kong, our company has always conducted business legally and compliantly. Recently, the financial market has encountered extreme conditions, resulting in huge losses and inability to call insurance for many of our counterparties, resulting in the dilemma of not being able to redeem. In the face of this severe situation, in order to ensure that the investor's investment principal is not lost, our company has taken active actions to raise funds by recovering from the counterparty, borrowing money, introducing investors, etc., so as to repay the investor's unpaid and unsettled contract option premium principal. ”

Changchang Securities said that it will start the refund process on October 11 and arrange for a refund of the principal of the option premium by appointment in batches. At the same time, Changchang Securities will also deeply reflect on its risk management and enhance its ability to respond to extreme market conditions.

Nanfang Huifa also recently informed investors that "due to the rapid and violent market fluctuations recently, the company's hedging strategy has not been executed as expected, resulting in the inability of your options contract transaction to be completed normally." We apologize for the impact on your trading experience and expected returns, and have decided to suspend the operation of the options business from October 8 after the company's internal assessment, and the options business will resume operation after the internal adjustment is improved. In the future, we will start the TRS business and actively deal with customer problems. ”

CSOP said that all position contracts will expire on September 30, and existing positions will be cleared at the VWAP price from 14:00 to 15:00 on September 30. Clients who have not yet settled will be refunded the difference in the option premium actually paid by the client to the company. The company plans to introduce a strategic investor, and it is expected that the plan will be clarified in about 20 working days, and the return process and information will be disclosed as soon as the funds of the strategic investor are in place.

Nanfang Huifa also said, "The impact of this extreme market has brought unprecedented difficulties to the company, and the company will actively reorganize and adjust its business strategy to restart operations in the next time." ”

The threshold for participation in OTC options in the Mainland is relatively high

The reporter learned that in the explosion of individual stock options of a number of small brokerages in Hong Kong, many victims were mainland investors. The reason behind this is related to the different thresholds for participating in OTC stock options in Chinese mainland and Hong Kong.

It is reported that investors in Chinese mainland participate in OTC stock options need to meet the "532" qualification, that is, 50 million yuan of net assets, 20 million yuan of financial assets, and more than 3 years of investment experience. At the same time, the option premium and initial margin cannot exceed 30% of the product size.

On the other hand, even if the participation threshold is met, the number of targets that can be participated in is limited. At present, there are less than 2,000 OTC options in the mainland, most of which are dual-financing targets, while there are more than 5,000 listed companies in the A-share market. On the other hand, in Hong Kong, all targets can be done, and the capital threshold is also low.

"In China, OTC options can only be traded with securities firms with legal entities or products as the main body. Therefore, two models have been born, the first is that the individual sends money to the controller of the legal person account, and then the legal person account places an order with the brokerage, and the controller pays the individual after making money, which is definitely non-compliant and has great legal risks. The second is an individual subscription product, which is traded by the product with the brokerage, then the product needs to be customized by the individual, and the scale and investment concentration must meet certain requirements. A senior derivatives research expert reporter said.

According to the above-mentioned research experts, in Hong Kong, individuals only need to open an account directly with a brokerage, and a small amount of money can be done; However, the qualifications of brokerages are uneven, which makes it easy to have credit risk.

Will the failure to redeem some of the off-market businesses in Hong Kong affect domestic securities firms? An interviewed person in the derivatives business of mainland securities firms said that mainland securities firms should not extend credit to them, so it will not be affected. Another industry insider told reporters that mainland brokerages are all hedging, and even in the face of soaring extreme markets, they have limited losses.

A derivatives practitioner told reporters that at the beginning of 2019 and after the epidemic in 2020, as some individual stocks soared, there were also some small Hong Kong institutions that exploded, but the over-the-counter business was small at that time and the scope of impact was very small. The person lamented, "Counterparty risk is the biggest risk. If you can't get the money you make, and if you lose the money, isn't it an ironclad loss? ”

Editor-in-charge: Liu Yiwen

Proofreader: Tao Qian