What Is Margin Trading?

1. what is margin trading?

"Margin trading", also known as "securities credit paction", refers to the behavior that investors provide securities to securities companies, borrow funds to buy securities or borrow securities to sell.

Financing is borrowing money to buy securities (Hong Kong is called "exhibition"). Securities companies borrow money from customers to buy securities, and customers repay their principal and interest at maturity. Customers buy securities from securities companies, which are called "buying". Securities are sold through securities, and then are returned by securities. Securities companies lend securities to customers for sale, and customers return the same type and amount of securities and pay interest.

2. four functions of margin trading

The head of the China Securities Regulatory Commission stressed that margin trading is a common way of trading in most stock markets in the world. Its role is mainly reflected in four aspects:

First, margin trading can integrate more information into the price of securities and provide the opposite direction trading activities for the market. When investors think that the stock price is too high or too low, they can make the stock price more reasonable by selling the margin and selling the margin, which is helpful to the formation of the internal price stabilization mechanism in the market.

Two, margin trading can enlarge the supply and demand of funds and securities to a certain extent, increase the volume of pactions in the market, thus activating the stock market and increasing the liquidity of the securities market.

Three, margin trading can provide investors with new ways of trading, which can change the unilateral aspect of the securities market and serve as a tool for investors to avoid market risks.

Four, margin trading can widen the scope of business of securities companies, and increase the application channels of securities companies' own funds and private securities to a certain extent.