The pledge rate refers to the ratio of the loan principal to the market value of the standard warehouse receipt, which is generally determined reasonably based on the price difference between futures and spot, price fluctuation range, trend and other factors. When the price difference is large, the price fluctuation range is relatively large, and the price is falling, the pledge rate will be relatively lower. On the contrary, the pledge rate can be higher.

Credit institutions (banks, pawnbrokers) set the pledge rate on the one hand to prevent default risks, and on the other hand to cover their costs of making up for losses and handling collateral after the borrower defaults.

Extended information

Relevant regulations on pledge ratio: With the approval of the China Securities Regulatory Commission, the Shanghai and Shenzhen Stock Exchanges and China Clearing Co., Ltd. have issued the "Stock Pledged Repurchase Transactions and Registration and Clearing Business Measures (Trial) " was revised, and the "Measures for Stock Pledged Repurchase Transactions and Registration and Settlement Business (Revised in 2018)" were released on January 12, 2018, and have been officially implemented since March 12, 2018.

Compared with the "Business Measures (Trial)", the revision of the "Business Measures" mainly includes three aspects:

1. Further focus on serving the real economy. It is clear that the incoming party shall not be a financial institution or the products issued by it. The incoming funds shall be used for the production and operation of the real economy and managed in a separate account. The initial transaction amount of the incoming party shall not be less than 5 million yuan (the Shenzhen Stock Exchange’s regulations are that the incoming party’s first transaction The minimum transaction amount shall not be less than 5 million yuan), and each subsequent transaction shall not be less than 500,000 yuan. Funds and bonds are no longer recognized as initial pledge targets.

2. Further strengthen risk management. It is clarified that the upper limit of the stock pledge rate shall not exceed 60%. The pledge ratio of a single A-share stock accepted by a single securities company and a single asset management product as a financier shall not exceed 30% and 15% respectively. The overall pledge ratio of a single A-share stock market shall not exceed 50%.

3. Further standardize business operations. Clarify the qualifications for securities companies to carry out business, and require securities companies to establish continuous management of credit risks of borrowers and tracking and management mechanisms for fund use.

People's Daily Online - The new stock exchange regulations stipulate that the upper limit of stock pledge rate shall not exceed 60%

Baidu Encyclopedia - Pledge rate