The Chinese regulator issued a document entitled "Regulating the risk of ‘cashing in securities margin trading’ and promoting the return of business to its origin" to brokerage firms, pointing out that some investors have recently used securities margin trading transactions to cash in, which is against the origin of business. As the organizer of securities margin trading, securities companies should effectively take the responsibility of active management, strengthen risk monitoring and supervision, and guide investors to rational and compliant transactions.

 “Cashing in securities margin trading" refers to the abnormal trading purpose of investors to purchase non-standard securities (i.e. "bypassing the standard") or transfer financing out of credit accounts (i.e. "financing") through financing and securities financing transactions to obtain funds.

The document puts forward three requirements for brokerage firms: First, to face up to the problem of "cashing in securities margin trading" and strengthen the awareness of compliance in business.

Second, the effective implementation of the main responsibility, take the initiative to investigate and clean up irregularities. The securities companies should, on the one hand, improve the credit limit, position structure, dynamic guaranty money and extension assessment management, gradually regulate the stock risk, prevent the incremental risk; on the other hand, the "high stock manipulation risk" suspicious accounts, should take effective measures to verify the identity of customers and trading motives, suspected of account lending, illegal financing should be cleaned up. The accounts suspected of lending and illegal financing should be cleaned up.

The third is to return to the origin of the securities margin trading, and strictly prevent the business from becoming "credit". The securities companies should take into account the difficulty of realizing collateral and concentration of public company major shareholders, prudently determine the credit, offsetting guaranty money commutation rate and other risk control indicators, and limit disguised pledge financing.

Statistics data presentation, as of August 27, the balance of the securities margin trading in Shanghai and Shenzhen was 1,867.056 billion yuan, the size of the securities margin trading has been the high point in the past six years. Since hitting a stage low at the end of April this year, the financing balance of the two markets has maintained a steady expansion trend since May, becoming one of the main sources of incremental funding for the market during this period.