According to the regulations, only qualified securities companies can engage in stock option business with the approval of the CSRC.
According to the regulations of China Securities Association, there are only seven primary dealers who can trade OTC options, namely GF Securities, Guotai Junan, Huatai Securities, CICC, China Merchants Securities, CITIC Securities and CITIC Jiantou Securities, and there are also 10 or 20 secondary dealers. Secondary dealers can only trade OTC options of individual stocks through primary dealers.
China Futures Association stipulates that some risk management subsidiaries of futures companies can also carry out OTC options business, and there are 7 companies.
OTC options trading has the following modes:
The first is the trading mode between qualified institutional investors and legal option management institutions (securities companies).
According to the relevant regulatory provisions, natural persons may not directly participate in OTC options trading, and only qualified institutional investors can legally participate. Qualified institutional investors include financial institutions, professional investment institutions, non-professional investment institutions and qualified foreign institutional investors. This mode is the only legal and compliant trading mode at present.
Second, institutional investors collect the rights of unqualified investors by holding or entrusting financial management, and the trading requests and trading modes between legal option operating institutions (securities companies).
This model may involve capital allocation, in which institutional investors collect royalties and trading requests from natural persons through sub-account system, and then trade with securities companies in their own names. However, because it does not meet the requirements of qualified investors, this model violates the regulatory provisions and may face administrative punishment, and may violate the criminal law if the circumstances are serious.
Third, institutions set up trading platforms and directly trade with unqualified investors as counterparties.
Under this model, the institution fictionalizes the situation of signing a trading agreement with a securities company, and illegally guides natural persons who do not meet the standards of qualified investors to directly participate in OTC options trading. This may violate the crime of illegal business operation and fund-raising fraud. The crime of fund-raising fraud refers to illegal fund-raising by fraudulent means, which involves the financial field, disrupts the financial order and infringes on property, and the circumstances are serious. According to the criminal law, this kind of behavior will be punished accordingly.
Ten questions and ten answers about OTC options;
1. Are OTC options legal and compliant?
-Yes, OTC options are organized by formal national financial institutions and are legal and compliant financial products.
2. How to participate in OTC options?
-Investors can participate in OTC options trading through corporate institutions (532) and fund products (525), and sign SAC agreements with relevant institutions to open trading rights.
3. What targets can OTC options invest in?
-Investors can choose to invest in basic assets, such as commodity futures, indexes, stock ETFs and most financial stocks.
4. Can OTC options be shorted?
-Yes, investors can use put options to short indexes and commodities, and some head brokers have also started to introduce put options.
5. What are the trading rules of OTC options?
-Most futures traders offer T+ 1 exercise rights, while securities traders usually offer T+5 exercise rights.
6. What is the trading time of OTC options?
-The trading hours of OTC options are basically the same as those in the stock market, usually from 9: 30 am to 1 1: 30, and from 13 to 15 in the afternoon.
7. How long does it take to complete the transaction after placing an order?
-In general, it can be completed in a few minutes at the earliest from inquiry to order.
8. What should I do if I encounter a target pause?
-According to the agreement with the dealer, if the contract period exceeds the suspension time, the exercise date will be postponed to the resumption date.
9. What should I do if the underlying asset price drops sharply?
-Investors don't have to worry about short positions or short positions, and the biggest loss is limited to option fees. As long as the contract does not expire, investors still have a chance to make a profit after the price of the underlying asset rises.
10. Is the OTC option a bet with the banker?
-Exchange traders usually use their own risk hedging systems to manage risks, rather than gambling with investors.