The securities lending system in the capital market has undergone new optimization. Approved by the China Securities Regulatory Commission in accordance with the law, starting from July 11th, China Securities Financial Corporation will suspend the application for securities lending and borrowing business. Existing securities lending and borrowing contracts can be extended, but must be settled no later than September 30th. At the same time, it is approved that the securities exchange will increase the margin ratio for short selling from no less than 80% to 100%, and the margin ratio for private securities investment funds participating in short selling from no less than 100% to 120%, which will be implemented from July 22nd. On July 11th, several large securities brokerage branches in Guangdong announced that the new securities lending business would be suspended from today, and the securities lending business with their own securities sources could still be carried out. As for specific adjustments such as margin ratio, they are still waiting for the headquarters' credit trading department to issue guidance notices. Industry insiders pointed out that suspending the securities lending business is conducive to maintaining a fair trading order in the capital market and avoiding the risk of significant price fluctuations caused by excessive securities lending by institutional investors. On the 11th, the A-share market rebounded with a general increase, and the three major indexes collectively closed higher. The trading volume of the Shanghai and Shenzhen stock markets exceeded 780 billion yuan, a significant increase of over 100 billion yuan from the previous trading day. Regulatory regulation continues to increase securities lending, and the scale of securities lending has significantly decreased. "Suspending securities lending, especially short selling, will help stabilize market sentiment," said Yang Delong, Chief Economist and Fund Manager of Qianhai Open Source Fund. Although recent market fluctuations are not entirely caused by securities lending and short selling, this measure by the China Securities Regulatory Commission has a positive effect on stabilizing market sentiment and boosting investor confidence. The so-called securities lending business refers to institutions or individuals such as China Securities Depository and Clearing Corporation lending their own or legally raised securities to securities companies, which provide them to customers for short selling. This operation can help investors achieve the goal of short selling transactions and also provide opportunities for securities companies to increase their business scale and income. Industry insiders point out that margin trading and securities lending are important fundamental systems in the capital market, which play a positive role in stabilizing irrational fluctuations, promoting long short balance and price discovery, and attracting medium and long-term funds into the market. However, due to the leveraged trading characteristics of securities lending, while investment amplifies returns, it also easily amplifies market risks. Due to the frequent occurrence of illegal and irregular behaviors such as major shareholders and related institutions reducing their holdings of restricted shares through multi-level nesting and securities lending "detours", since August 2023, in response to market concerns about securities lending and securities lending, the China Securities Regulatory Commission has taken a series of measures, including prohibiting the lending of restricted shares, reducing the efficiency of securities lending, and strictly prohibiting the use of securities lending to implement disguised T+0 trading. At the same time, securities companies are required to strengthen the management of customer trading behavior and continue to increase regulatory and law enforcement efforts against illegal and irregular behaviors such as improper arbitrage through securities lending. On February 6th of this year, the China Securities Regulatory Commission required a suspension of the scale of new securities companies' securities lending and borrowing, with the balance of securities lending and borrowing on the same day as the upper limit, and the stock gradually settled. Since the beginning of this year, we have been actively reducing the volume of this business, so the impact of this policy adjustment on our business is not significant A person in charge of a large securities brokerage business department in Guangdong said. Data shows that as of the end of June 2024, the cumulative scale of securities lending and securities lending has decreased by 64% and 75%, respectively. The scale of securities lending accounts for about 0.05% of the circulating market value of A-shares, and the proportion of daily securities lending sales to A-shares trading volume has decreased from 0.7% to 0.2%. The current conditions for suspending securities lending have matured, and the scale and proportion of securities lending and securities lending have significantly decreased, significantly reducing their impact on the market Chen Guo, Chief Analyst of Strategy at CITIC Securities, stated that the current market situation has created conditions for the suspension of securities lending business. It is understood that setting a transition period of about two months for stock to short selling contracts is to reduce the impact on the market and avoid sudden suspensions that may disrupt normal trading. The China Securities Regulatory Commission (CSRC) stated that this adjustment clarifies the legal extension and separation arrangements for existing businesses, which helps prevent business risks and maintain the stable and orderly operation of the market. Strengthening the monitoring of programmatic trading and promoting the reduction of high-frequency trading frequency and speed, Shen Wanhongyuan pointed out that the recent policies on securities lending/securities transfer reflect the China Securities Regulatory Commission's strengthened supervision of securities lending business, directly reducing the scale of market securities lending, especially for high-risk private equity quantitative institutions that rely on securities lending hedging, which reduces investors' concerns about private equity funds and other institutional investors selling through securities lending. Recently, the A-share market has been under continuous pressure. As a result, securities lending and program trading have once again become the focus of controversy. The previous transition from the "T+0" to the "T+1" system for securities lending has also had a significant impact on the field of quantitative trading. On July 10th, the head of the relevant department of the China Securities Regulatory Commission also issued a statement on the progress of program trading supervision, stating that they will guide the stock exchange to quickly publish and implement program abnormal trading monitoring standards, set a "red line" for program trading monitoring, and further promote program trading, especially high-frequency trading, to reduce frequency and speed. It is reported that on May 15th, the China Securities Regulatory Commission officially released the "Regulations on the Management of Programmed Trading in the Securities Market (Trial)", which clarifies a series of regulatory arrangements such as trading supervision, risk prevention and control, system security, and special regulations for high-frequency trading. In addition, the China Securities Regulatory Commission continues to strengthen the monitoring of procedural trading, organizing stock exchanges to study and formulate four monitoring indicators: abnormal instantaneous declaration rate, frequent instantaneous cancellation, frequent lifting and suppression, and short-term large transactions. Based on indicators such as declaration quantity and cancellation rate, research and clarify the standards for charging additional traffic fees, cancellation fees, etc. for high-frequency quantitative transactions, in order to 'increase costs' and promote' speed reduction ' On July 10th, the China Securities Regulatory Commission stated that it will continue to strengthen the monitoring and supervision of trading behavior, and resolutely crack down on and severely investigate those who engage in illegal and irregular activities using programmatic trading, especially high-frequency quantitative trading, in accordance with the law. Data shows that since the beginning of this year, programmatic trading in the securities market has remained stable with a slight decline, and there have been some positive changes in trading behavior. As of the end of June, there were over 1600 high-frequency trading accounts in the entire market, a decrease of more than 20% within the year, and behaviors that met abnormal trading monitoring standards have decreased by nearly 60% in the past three months. The China Securities Regulatory Commission stated that the next step will be to thoroughly implement the "Several Opinions of the State Council on Strengthening Supervision, Preventing Risks, and Promoting High quality Development of the Capital Market", always placing the maintenance of institutional fairness and the improvement of market internal stability in a prominent position. At the same time, based on market conditions, we will strengthen daily supervision and countercyclical adjustment, crack down severely on illegal and irregular activities such as improper arbitrage, ensure the stable operation of the market, and effectively safeguard the interests of investors. (New Society)