You can borrow money from securities firms to buy stocks. This is financing. Interest needs to be paid and there is a time limit. The risks and returns are magnified accordingly. In contrast, this is securities lending. The editor has compiled a detailed introduction. Hope it helps.

Definition of stock margin trading

The margin trading business refers to the business in which securities companies lend funds to customers for them to buy securities or issue securities for them to sell securities. Securities transactions resulting from margin trading and securities lending business are called margin trading and securities lending transactions. Margin trading is divided into two categories: margin trading and securities lending. Customers borrowing funds from securities companies to buy securities are called margin trading, and customers selling securities to securities companies are called securities lending transactions.

The role of stock margin trading

Playing the role of price stabilizer

Under a perfect market system, the credit trading system can play the role of price stabilizer. That is, when excessive speculation or market making in the market causes the price of a certain stock to rise sharply, investors can sell the stock through securities lending and selling, thereby promoting The stock price falls; conversely, when a stock is undervalued, investors can purchase the stock through financing purchases, thereby causing the stock price to rise. [1]

To be more specific, taking securities lending transactions as an example, when the prices of certain stocks in the market become inflated due to excessive pursuit of investors or malicious speculation, sensitive speculators will promptly If they are aware of this phenomenon, they will borrow stocks to short-sell, thereby increasing the supply of stocks, easing the market's tight supply of these stocks, and inhibiting the continued generation and expansion of stock price bubbles.

When the prices of these overvalued stocks fell due to the bursting of the bubble, investors who had previously short-sold these stocks took the opportunity to re-buy these stocks to repay the securities borrowed in order to lock in their existing profits. Debt, thus increasing the market demand for these stocks, playing the role of "supporting the market" to a certain extent, thus achieving the effect of stabilizing the securities market.

Margin margin trading helps investors express their expectations for the actual investment value of a certain stock, guides the stock price to reflect its intrinsic value, and slows down the fluctuations of security prices to a certain extent, maintaining the stability of the securities market.

To effectively alleviate the financial pressure on the market, financing channels for securities companies can include funds and other methods, so the liberalization of financing and the entry of bank funds into the market will also be carried out in two steps. During the downturn in the stock market, for institutions such as funds that need capital adjustment, it can not only solve urgent needs, but also bring considerable investment returns.

Stimulate the activity of the A-share market

The margin trading and securities lending business is conducive to the active market trading, and using the amplification effect of the funds on the market is also a way to stimulate the activity of the A-share market. CITIC Securities analysts Wu Chunlong and Chen Xiangsheng believe that margin trading and securities lending business will help increase the liquidity of the stock market.

Improve the living environment of securities dealers

In addition to bringing considerable commission income and interest spread income to securities dealers, the margin trading business can also derive many product innovation opportunities, and It provides the possibility of cost reduction and hedging for self-operated business.

The foundation of the multi-level securities market

The margin financing and securities lending system is the foundation of the modern multi-level securities market, and it is also the inevitable outcome after resolving the separation between the old and the new

Comics: Masters of Margin and Securities Lending Business

Comics: Masters of Margin and Securities Lending Business

Supporting policies for structural supply and demand imbalances.

Margin margin trading, short-selling mechanisms, stock index futures, etc. are connected together, which will bring about a huge amplification effect on the scale of funds and market risks at the same time.

In an imperfect market system, credit transactions will not only fail to act as a price stabilizer, but will further aggravate market volatility. The risk is manifested in two aspects. First, if the overdraft ratio is too large, once the stock price falls, the loss will be doubled; second, when the market index goes bearish, credit trading will help the decline.

Risks of stock margin trading

1. The margin trading business can help the underlying securities to rise and fall. The securities market has the characteristics of buying more as it rises and selling more as it falls, which is what we often call the phenomenon of chasing the rise and killing the fall. The margin trading and securities lending business introduces credit transactions, and investors can operate through financing or securities lending, which can help the underlying securities rise and fall. The introduction of margin trading and securities lending business will increase market volatility and fuel the speculative atmosphere in the market.

Margin and securities lending business

2. The introduction of margin trading and securities lending business makes securities transactions easier to be manipulated. The margin trading and securities lending business has a leverage effect by introducing credit transactions, making it easier for speculative funds to manipulate the market, easily causing huge market fluctuations and harming the interests of investors.

3. Margin financing and securities lending business may pose certain threats to the stability of the financial system. Margin margin trading is a type of credit transaction, and a margin system is implemented, which intensifies the turbulence of the securities market. In extreme cases, if investors have good expectations for the future and are unanimously long, financing may cause a large amount of credit and other funds to enter the securities market, causing a large number of bubbles in the spot market and accumulating financial risks; and in the case of economic recession and market depression, , investors unanimously went short, and securities lending caused the spot market to fall sharply, and even triggered a market crisis.

Large fluctuations in the spot market will also greatly damage the stock index futures market, and margin trading and securities lending business increase the systemic risk of the entire financial system.

In short, the introduction of margin trading and securities lending business is an important measure to deepen the construction of the basic system of my country's securities market, and its advantages outweigh its disadvantages. It will change the unilateral market situation of my country's securities market, improve the supply and demand relationship of funds in the securities market, and is of great significance for improving the efficiency of the securities market.