Margin by fdjerue7eeu

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									Margin
   First, the concept of margin trading
Margin, also called securities credit transactions, refer to the State Council approved
the stock exchange or other securities exchange of securities transactions, securities
companies lend money to customers for the purchase of securities or securities
lending for its sale, and collateral deposited by the customer's business
activities accordingly. In short, financial means to buy air, Securities Lending means
the short selling:
Financing in which investors buy bonds as collateral, into some money to buy
securities, and then repay the money within a specified time. Investors to finance the
purchase of securities, may sell tickets by way of repayment or direct payment to the
members pay into the fund. Repayment of the investors to sell tickets through their
credit report to sell securities account securities, securities settlement proceeds when
sold direct transfer of funds to finance private accounts as a member of repayment.
Short selling is when investors sell into securities sold to deposit as collateral for a
specified period of time, then return the securities. Short selling period, the investors
through its ownership or control of securities account holders with the same
underlying securities sold short selling. Investors sell short selling, may also through
vouchers or coupons to buy tickets direct way to the members also pay into the stock.
Buy tickets also means the investor coupon securities accounts through their credit
report to buy tickets, direct transfer of account to buy securities to members of a
securities account is NT-specific approach is also coupons.
Second, the main features of margin
By the concept of margin, we can see that margin has the following characteristics:
1, leveraged. Securities margin trading the most significant feature is to borrow
money to buy securities and selling securities through the securities. Common stock
must pay the full price, but the margin can only pay a certain margin trading. For
example, if 10% of the deposit paid, which means the amount can be ten times as
many operations. Investors, securities companies through the margin to expand a
bargaining chip, you can use less capital to obtain a larger profit, which is leveraged
credit transactions.
2, capital dredging of. Money market and capital market as financial markets are
integral components, the flow of capital between the two markets to smooth state, if
the financial flows between the channel obstruction or stenosis, is bound to reduce the
overall efficiency of financial markets. Credit trading mechanism to securities and
financial institutions as the intermediary, a link with bank financial institutions, an
association with stock market investors, through margin trading, funds guide the
orderly flow between the two markets so as to enhance the overall stock market
efficiency. Therefore, the basic function of credit trading mechanism, it is the money
market and capital markets an important channel for capital dredging of a fund.
   3, credit duality. Margin trading in securities of double credit relationships. In
financing credit transactions, investors can only buy securities to pay part of the
purchase price, less than the price of the advance by the broker, the broker advances
funds to investors is based on credit basis, meaning that some brokers advance post
section, is this part of the future to repay investors and pay the corresponding price of
interest as a precondition. This is the first layer of credit relationships: on the other
hand, the broker advances and shortfalls, as a general practice, from
broker's own funds, customer deposits, bank loans or financing in the
money market. This is known as refinancing, including funds and securities
refinancing refinancing. As the trial period in China only allows securities companies
use their own funds and own securities in margin trading business, thus establishing
the initial margin, China's only the first layer of credit relationships.
4, short mechanism. Common stock must be bought after the sale, when the stock
price can easily profit, but when stock prices fall, either stop or wait for the price of
flesh rise again. The introduction of margin trading system, investors borrow shares
before selling, so the price indeed falls back after securities firm to buy return. This
means that can profit from falling share prices, market conditions changed
unilaterally.
Third, the main rules of margin trading
Margin trading rules exist in many, we are here mainly to emphasize the following
three kinds of investors of the more common rules: naked short selling, margin rules
and regulations of gains.
Naked short selling (naked short selling)
Naked short selling refers to the short sellers do not hold shares in itself, nor borrowed
stock, and pay a deposit and certain provisions of the T +3 time borrowing to buy
stock and delivered to the person, said this short form as naked short selling, short
sellers if the settlement date can not borrow the stock and delivered on time to buy
those, then it is called the delivery failure, but failure to deliver is not illegal, even if
the delivery fails, the transaction will still be continued , only to be delivered
complete.
At first, naked short selling is not illegal in the United States, and only when the abuse
of naked short selling and stock price manipulation is illegal. July 15, 2008, SEC
emergency order against Fannie Mae and Freddie Mac and Citigroup, Goldman Sachs,
Lehman Brothers and other 19 financial stocks listed on naked short selling, in order
to reduce the volatility of financial stocks, September 17 Day, SEC to implement
more stringent measures to ban naked short selling, and that on the naked short selling
abuses SEC has reached a zero tolerance level.
Shenzhen Stock Exchange Margin Trading Member Business guides the pilot pointed
out, the customer may not sell more than the number of credit securities securities
securities account that the short sellers must borrow stock before it can be sold, and
sold shall not exceed credit securities account the number of underlying securities;
pilot broker during the trial can only be lent to short sellers who own securities, it is
extremely beneficial to the source of the short selling, delivery and settlement
monitoring. In fact, the naked short selling of securities lending, delivery, billing is
more complex than ordinary short selling more and more complex risks of investment,
we believe that naked short selling in China in the short-term almost impossible.
Of gains rules (uptick rule)
Of gains rules, also known as rising short-selling, or short selling price must be higher
than the latest transaction prices, the first rule is to prevent the financial crisis led to
sharp fall in the short pressure.
Rules of origin in the United States of gains, but the United States from 2005 to
gradually abolish the pilot project in the newspaper Le rose Guize, 2007 Chedifeichu
the reported rise rule, in the current financial market turmoil also did not rule on the
reported rise Jinhanghuifu; Er China's Hong Kong in 1996 abolished the
rule of gains, after the 1998 Asian financial crisis, uptick rule on September 7, 1998
and re-introduced, since 2007 Hong Kong Securities Regulatory Bureau also consider
removing the restrictions, but so far not implemented. Europe generally did not set the
rules for short selling transactions.
In China, "Shanghai Stock Exchange Margin Trading Rules
Pilot" and "Shenzhen Stock Exchange Margin Trading Rules
Pilot" According to the Shanghai and Shenzhen Interim Provisions of the
Securities Lending Securities Lending Securities Lending sell air of gains rule:
"Securities Lending sell price not lower than the declaration of the last
transaction price of the securities; day transactions have not yet produced its report
before the price of not less than the closing price. less than the price declared as null
and void the declaration." Therefore, our stock market early in the
implementation of margin trading rules will be strictly enforced to regulate newspaper
l behavior of short sellers.
Margin Rules
With initial minimum deposit of credit margin and maintenance margin. Investors to
open securities trading accounts of credit shall be the initial margin deposit.
Maintenance margin is set up to prevent the credit transaction because of the
underlying stock price changes that may arise in the credit risk of the broker.
Published in the Shanghai and Shenzhen Regulations margin provided a clear margin
percentage of the initial margin requirement ratio of not less than 50%, to maintain
guarantee ratio (the total client assets / total liabilities ratio) not lower at 130%, and
the customer if the overdue maintenance margin, the ratio must return 150% of the
above.
Fourth, the basic functions of margin
In the world securities market development, short selling though often become the
focus of debate, but still be retained as part of stock market trading system. Overall,
the short selling mechanism has four basic functions: hedging, to stabilize the market,
price discovery and provide liquidity.
a-hedging feature
Hedging tools are the basis for institutional long-term investment securities market
conditions, lack of hedging instruments in the case of long-term gains and short-term
gains while achieving maximum possible, which is the securities investment funds
often       faced      with       "subscription          style"       and
"redemption of the wind," the root cause, the results of
increased market volatility. Therefore, the hedging instrument is necessary for
long-term investment.
Risk in the stock market events and uncertainties are two types of events the event,
the former often can be used for other methods to circumvent the portfolio, while the
latter only through the hedge to avoid the incident. Hedging tool for the investment
provides more protection.
The use of short selling to hedge the famous Black-Scholes option formula for the
basic premise, that short selling is an important part of hedging. Hong Kong securities
market in China short selling mechanism in the opposite lesson we should learn from
the Hong Kong Securities lack of spot market short selling mechanism, the
development of the entire stock market has brought many problems, the defect on
October 19, 1987 Hong Kong stock market stock market meltdown bear some
responsibility.
b-stabilize the market function
In the absence of long-term investment conditions, market stability out of the question.
Conditions in the absence of short selling, short-term investments of all agencies of
the inevitable choice, leading to market spike. Stock market stability and a long-term
investment in each other. On the one hand, if the stock market's volatility is
small, it will help to promote a long-term investment; on the other hand, a long-term
investments will make the market more stable.
In the spot market, the introduction of short selling securities trading mechanism, can
increase the elasticity of supply of the underlying securities when the market price of
certain stocks as investors sought after excessive or malicious speculation become
unrealistically high, the speculative short sellers will be timely aware of this
phenomenon, so they borrow shares to sell short through to the stock supply increased
significantly eased the market shortage of these stocks tension, inhibition of the stock
price bubble continues to build and expand. And when the market was overvalued
stock prices fall due to bubble Er Shi, the former short maturity of these stocks
because investors need to be re-bid delivery of these shares, this will increase market
demand for these stocks, in a kind of degree, act as a "lifting"
effect, so as to achieve stability in the stock market effect. Margin of market stability
features to help market the internal mechanism of the formation of price stability.
c-price discovery
The existence of short selling allows stock investors who do not have the opportunity
to express their actual investment value of these shares is expected to opportunities,
making the stock the market forces of supply and demand are matched, these large
forces of supply and demand of stock, large-scale derivatives transactions and the
resulting price competition will greatly improve the effectiveness of the stock price.
Effective market demand can be completely and fully reflect the price the buyer and
seller of information, but the lack of short selling the stock price makes the expected
drop in itself is not about to securities investors can not express their expectations on
the stock, limiting the supply of the stock market on the number of caused the stock
market's supply and demand balance of power. Margin of the price
discovery function of stock price to more fully reflect the intrinsic value of the
securities.
d-function of providing liquidity
Mobility is essentially a price difference, in the absence of short selling mechanism,
the market does not reflect the price differences reflect only the cost of the
participants held. In the short selling mechanism in the case, the price difference will
really produce, thus avoiding the current lack of liquidity, such as fund Awkwardness
of the situation. Short selling creates more counterparties, and enhance the
stock's liquidity. In the case of no short selling, the Securities and
Exchange are always in a state of a lack of counterparty, greatly damaged the stock
market liquidity. Mobility enhancements, benefit related to securities trading activity.
5, the main regulatory constraints margin
"The pilot implementation of margin trading rules," which
stipulated used to offset margin securities, deposit the amount in the calculation of the
securities market should be converted according to the following conversion rates: (a)
SSE 180 Index constituent stocks of the highest rates of non-stock conversion More
than 70%, the highest rate of conversion of other shares not exceeding 65%; (b)
exchange-traded open-end index fund does not exceed the maximum conversion rate
of 90%; (c) bond discount rate not exceeding 95%; (4) Other listing securities
investment funds and bond discount rate not exceeding 80%.
Meanwhile, in order to prevent excessive market volatility, "the pilot
implementation of margin trading rules" of the securities margin alone the
scale of the following limitations:
1. Single finance the balance of the underlying securities to the market value of the
securities market could be in circulation 25%, the Exchange will suspend trading day
in the second one bought their financing; when the balance of its funding reduced to
20%, the exchange can times a transaction resume its financing buy;
2.'s Short selling the underlying securities alone margin to the liquidity of
the securities market to 25%, the Exchange will suspend trading day at the time of a
sale of its Securities Lending; when the short selling margin decreased to below 20%
the exchange can be resumed in the second one trading day to sell their short selling.
6, margin trading business-related accounts
Be eligible for the pilot securities companies and investors to participate in margin
trading services require their own name, the China Securities Depository and Clearing
institutions and commercial banks to open accounts
For securities companies, securities account is NT-specific (1) and the financing of
private capital account (6) to investors and regulators to prove that the necessary
funds in margin trading and securities guarantee; it guarantees a certain extent funds
and securities firm securities can not be diverted to other uses. The credit trading
securities settlement accounts (2) settlement of funds and credit trading account (3)
belonged to the settlement clearing margin accounts. Customer credit-backed
securities trading account (4) is a securities company registered in the
company's level of accounts (general ledger), the second detail is the
customer credit account securities account (5).
For investors, the first selection of a securities firm to open a margin account
securities (5), the account is a securities company registered in the company an
account (customer credit-backed securities trading accounts, 4) the second detail
account. Meanwhile, three companies with the securities depository agreement,
commercial bank capital account (8), signed an agreement with the securities
company, securities company to become a Silver account in the business (customer
credit guarantee funds account transactions, 7) The two accounts - customer credit
financing accounts (8).
The following is a detailed explanation on each account:
1, short selling special securities account - used to record the securities company
intends to hold client securities and client financial return out of the securities may not
be used for securities trading;
2, customer credit-backed securities trading account - used to record the client
commissioned the securities held by the Company, guarantees the securities company,
born to the customer margin debt securities;
3 credit trading account securities settlement - for customers of securities margin
trading settlement;
4 credit transaction settlement funds account - for customer margin trading settlement
funds;
5, customer credit securities account - credit transactions for clients of the two
account-backed securities account for securities companies record customer
commission backed securities held by a breakdown of the data;
6, financing special capital account - for the storage of customer securities company
intends to finance the return of funds and customer funds;
7, customer credit trading guarantee funds account - used to store customer deposit,
and guarantee securities company, born to the customer margin debt funds;
8, client credit capital account - is for clients of credit guarantee funds account for two
trading accounts, to record customer funds deposited with a security detail data.
   7, the investment strategy under margin
Margin provides two new trading mechanisms: 1) leverage transaction 2) short
mechanism, trading leveraged investors will enlarge the risks and benefits, so the
timing ability of investors and value judgments have a higher capacity of
requirements and provide a short value of the new profit model, can be profitable in
the long on the mechanism of short, investors judge the importance of market trends
will also increase. By function points margin investment strategy under the hedging
strategy, speculation and arbitrage strategies strategy three categories.
1 margin hedging strategy under the
a-hedge the risk of individual stocks
Hedge the risk of operation is based on individual stocks and relatively simple.
Suppose an investor holds a stock, first see if it is the subject of short selling securities.
It is anticipated that the subject of Shanghai and Shenzhen stock short selling only
part of the total of all the listed stocks. The underlying securities in the stock belongs
to the conditions, in order to hedge the risk of the stocks fell as investors sold the
same number as long as the short selling of stock can be. If the stock does not belong
to the underlying shares, investors can sell short selling shares correlation with the
underlying stock higher.
b-hedge portfolio risk
In the early launch of margin trading, we speculated that the Shanghai Stock
Exchange will be the first choice of license to do the constituent stocks of the pilot,
Shenzhen, the Shenzhen Stock Exchange will choose a constituent stock of the pilot
to do. Scenario really as expected, then any of the stock portfolio can be divided into
the following scenario:
All shares held by the portfolio subject to margin;
Part of the portfolio shares subject to margin;
All the stock portfolio is not the subject of margin.
For the first case, hedging is relatively simple, as long as the short selling of stocks to
sell all the combinations you can. For the third case, may be short selling the
underlying securities portfolio constructed with a combination of high relevance, and
sell the combination of short selling.
For the second case, there are two ways to hedge, one of the methods under the
conditions in the stock index futures, short selling the underlying securities will be
built into the index portfolio, short Index. The second method is the combination of
short selling for the short selling of all the underlying stocks.
c-used in conjunction with warrant hedging
Currently the major cities of the stock warrants are equity warrants, therefore,
warrants margin used in conjunction with the mode is to buy warrants, stock short
sales in order to hedge the risks of margin trading or risk purchase warrants. However,
as domestic warrants and underlying securities are not high correlation between the
movements, strategy is not feasible.
2, margin trends in investment strategy under
a-leveraged speculation strategies trend
This is the basic speculative strategy. Since the implementation of margin trading
margin business, and can be used to offset margin securities, it can play the role of
financial leverage.
Investment with leverage to improve fund use efficiency, margin trading day itself
implies the possibility, so the launch of margin trading business trends in investor
wealth for the investment, the trend in the right context to judge access to higher
investment efficiency.
Leverage trends in strategy, can build a positive reverse leveraged funds and
leveraged funds:
Being leveraged funds: Because it is being leveraged funds, so investors to raise funds
to buy index portfolio after all, and this combination as a deposit and financing to buy
more index portfolio. If we all share the discount rate is set to 0.65, while the largest
funds being leveraged up to 2.3 times leverage ratio. In addition, investors can also be
the ability to raise funds to buy after the All ETF, then this ETF as margin, to buy
more ETF. ETF's discount rate is set to 90%, then this method leveraged
index funds build up to 2.8 times the maximum leverage.
Reverse Leverage Fund: As the reverse index funds, so investors can not be used to
raise funds to buy shares after the combination, but you can buy bonds and other
fixed-income asset classes, and then to cash or bonds as margin, short sales index
combination, as the cash conversion rate of 1, the conversion rate of 0.95 bonds, so
short sales to achieve maximum leverage of 2 or 1.9 times.
The trend of speculative strategies, operating practices of short selling, general There
are two main forms:
If investors believe that recent bearish, short sellers often choose the strategy Zapan
hands, and then buy back in low, if the use of such operating practices, a substantial
amount of short selling will result in higher future share price fell sharply.
As the requirements of short selling uptick rule that the offer can not be less than the
immediate short selling transaction price, plus direct Zapan be difficult, retail
investors pulled the usual practice is to ship, and then pulled bought used securities on
the market impact, and then to the bottom of the accumulation. If the use of such
operating methods, increase the amount of short selling shares flew not necessarily
lead to decline, future stock price movements may be increased and then decreased
trend.
b-130/30 Strategy
The so-called 130/30 strategy is the combination of long positions held by 130% and
30% of the short position. Although the use of investment leverage 130/30 strategy,
but because of offsetting long and short positions, so the market risk exposure, or
remain unchanged (β = 1). Also hope that the market risk exposure in the same
situation, but can produce better investment results, and thus enhance the portfolio
alpha.
Also similar to 120/20, 140/40, etc., but generally no more than 50% of the short part,
this is because the United States under the T-Bill, the overall position should not
exceed 200%.
In recent years the most popular or the 130/30 strategy, because the findings show that
short selling restrictions is a good stock picking ability of fund managers to improve
portfolio performance of one of the major obstruction, but, in most cases, 30 % ratio
of short selling can allow 100% in the case of short selling contributed 90% of the
proceeds.
130/30 funds can be seen as between mutual funds and hedge fund products, to keep
consistent with the risk of market risk exposure, but also more effective use of
resources, both from the stock rose as the Heritage Foundation to benefit can get
income from the stock fell, to some extent can be regarded as a positive extension of
the portfolio.
130/30 strategy is a simple way: the first step, the shares of the stock pool sort α; the
second step, according to rankings by a certain percentage of short-selling after stocks;
the third step, with the short position by buying from stock before.
3, under the arbitrage strategy of margin
a-market-neutral strategy
Market neutral strategy is the use of different securities investment philosophy
difference between the Alpha, the opposite operation of the long and short positions
by offset each other, to get absolutely nothing to do with market risk, income, also
known as relative value strategies.
Market neutral strategy means that the Fund does not bear the market risk and,
therefore, unable to obtain the market risk in return. In a bull market, the market
neutral strategy is not being highlighted, in a bear market, market neutral strategy is
easier to play to their strengths.
Common strategies include market neutral arbitrage strategies and statistical arbitrage
strategy fundamentals:
Statistical arbitrage strategy is that, if there is a difference between the stock price
stable relationship, once the actual values deviate from this relationship to a certain
extent, to obtain income through arbitrage.
Fundamental arbitrage industry mainly in the construction of a portfolio, buying
undervalued stocks within the industry to sell overvalued stocks within the industry.
As long as the relative strength of the trend for stock investors're right that
investors can make money.
b-used in conjunction with the stock index futures arbitrage strategy
Securities Lending business combination with the stock index futures arbitrage to
provide investors with an opportunity to arbitrage trading is one over-estimated in the
other cases have underestimated. The theoretical price index futures arbitrage-free
model can be decided, once the market price deviates from this theory, the price of a
price range, investors can in the futures market and spot market and buy low sell high
Huoqu by profit, this is the stock index futures The period is arbitrage. Among them,
the theoretical index futures price model is: Ft = St × EXP ((rf-d) × (Tt)), where Ft is
the theoretical price of stock index futures, St is the spot price of the underlying index,
rf, capital lending rate, d is the annual dividend rate of the underlying index, Tt is the
time for the survival of stock index futures. Theoretical model of stock index futures
price is an important assumption: the price of stock index futures stock index price
and net from the holding costs to decide. But in fact the prices of stock index futures
will be many other factors, such stock index futures may not be equal to theoretical
price. But in view of the special contract design, index futures to the delivery date, its
settlement price will converge to the spot index, shows that the theoretical price at
least in and around the due date is established. When the prices of stock index futures
before the expiration date does not mean that the theoretical price, relatively large and
if the deviation is greater than the transaction costs related to, the arbitrage
opportunity arises.
When the index futures price is higher than the theoretical price of the no-arbitrage
futures interval upper bound, on the price is overvalued, arbitrageurs can sell futures,
buy while the proportions according to the corresponding index number of constituent
stocks in the futures settlement on the due date to obtain arbitrage profits, the
so-called positive arbitrage arbitrage, that is, buy stock index futures, stock + sold.
Stock index futures prices are lower than in the no-arbitrage interval lower bound, the
buy futures, short selling the corresponding percentages of the constituent stocks, the
so-called reverse arbitrage.
c-used in conjunction with the Fund's arbitrage strategy
Because the Fund can serve as a venue underlying securities margin trading, which is
relatively high conversion rate, ETF Fund, 90%, closed-end funds and LOF fund 80%.
Given the current relatively more closed-end fund discount, you can carry through the
implementation of margin trading activities: Construction of selected combination of
closed-end discount, calculate the relative value of the underlying index β, may be
short selling the underlying stocks selected β value is equal to the Fund Portfolio
Construction β value, buy the constructed portfolio of funds, margin securities sold by
the same portfolio structure, closed-end funds held to maturity or converted to open
time, redeem or sell the fund and buy a ticket open. However, short selling can not
exceed the maximum period of 6 months, so the operator can choose to maturity in
about 6 months of closed-end funds to operate.
Because all of the current closed-end funds are the remaining period of more than 2
years, therefore, the arbitrage strategy in the short term, for the time being not feasible,
however, if investors believe that closed-end fund short selling period, the net return
to the unit, then You can use the arbitrage strategy.
d-and convertible bond arbitrage strategy with use of
When there was a substantial discount of convertible bonds, investors can buy
convertible bonds, while short selling the underlying stock to sell convertible bonds
and convertible bonds into stock quickly for the return of SBL to generate income.
When there was a substantial premium of convertible bonds, investors can be raised to
buy the underlying stock, while short selling convertible bonds to sell. The
assumptions of arbitrage strategy is to convert the value price of convertible bonds
return. Convertible bond premium cases, the conversion value of convertible bonds to
return only two ways: either the convertible bond fell more than regular stocks, or are
shares rose by more than convertible bonds. In general, the time of redemption of
convertible bonds with conversion value to the return of property. Since short selling
can not exceed the maximum period of 6 months, so this operation can only select
from the early redemption of the redemption or expiration of 6 months to operate
within the convertible bond.
e-used in conjunction with warrant arbitrage strategy
Discount appears when the warrant when the warrant with the use of margin trading
and can arbitrage. To do the following when the warrant discount, that is stock price -
(price + per share exercise price of warrants) is greater than 0, the short selling is
selling stock, while buying warrants, warrants to hold the portfolio until maturity, then
the exercise is to buy shares of the stock return. Arbitrage earnings for stock price -
(price + per share exercise price of warrants). Since short selling can not exceed the
maximum period of 6 months, so this operation can only select from the maturity of
the warrants within 6 months to operate.

								
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