Pathfinding Stock Repurchase Transaction

"To sell or not to sell?" companies badly in need of capital often face difficult choices of forced cash in stocks. And along with stock repurchase The difficulty of the transaction will be resolved.

"Finance and economics" reporter learned that, recently, Shanghai securities The stock exchange (hereinafter referred to as the Shanghai Stock Exchange) is exploring the business of stock buyout buybacks by brokerages. CITIC Securities (600030.SH), China Merchants Securities (600999.SH), Haitong Securities (600837.SH), Guoxin Securities Six brokerages of Galaxy Securities and Guotai Junan Securities participated in the preliminary study of the new business.

The securities repurchase transaction refers to the agreement between the buyers and sellers when the transaction is made, and the reverse transaction is made at a certain price at a certain time in the future. The essence of this is that the securities holder will pledge the right to use funds within a certain period of time from the financial and financial partners, and repay the loan funds and pay a certain interest after the expiration. Unlike the way in which the stock is sold, the stock holder in the repo transaction only loses the ownership of the stock in stages.

Buyback transactions are divided into pledge and buyout. The difference between the two lies in whether the share of the pawn is transferred to the financial and financial side, and it needs to be transferred in buyout repurchase. During the period of repurchase, the financial side can use the underlying assets to repurchase funds or sell the assets, while in the pledge type repurchase, there is no need to pass the household, and neither side can use the pledge stock.

According to the broker who participated in the study, six stock repurchase transactions studied by the securities companies were buyout. Some brokerages have already designed the plan for the Shanghai Stock Exchange, and some details of the transaction are still under discussion.

Buyback repurchase is mainly caused by management risk. The head of a brokerage firm in Shanghai said that the stock assets of the client should be transferred to the securities company completely and frozen to the Clearing Corp of China securities registration. After obtaining funds, customers can invest their funds in various projects.

At present, customers can obtain funds or securities through margin trading with brokerages, but the funds or securities acquired can only be traded in the securities market. By contrast, stock repurchase exchanges are undoubtedly more widely used.

But it also increases the risk of the financial sector. Executives of a large brokerage firm in Shanghai have admitted that the securities brokerage accounts system for stock repurchase is not yet sound. The audit of the risk of customer financing is not the strength of the securities companies. How to grasp the risk of stock repurchase transactions is a challenge that all brokers must face.

In the existing several trading schemes, the risk assessment of various brokerages is mainly focused on customer credit evaluation. There is not much concern about the use of customer financing. A broker who participated in the design said that there was a gap between the broker and the bank in the risk audit of the customer investment project.

In view of risk control considerations, management requires securities companies to deduct full net capital from stock buyout repurchase business, that is, how much money the broker takes to carry out the business. When calculating net capital, the securities company must deduct the corresponding amount of funds, which means that only a small number of net capital sufficient brokerages can carry out this business.

At present, there are nine securities companies with net capital exceeding 10 billion yuan, including CITIC Securities, Haitong Securities, Everbright Securities (601778.SH) and China Merchants Securities. The six brokerages participating in the business study are most likely to be the first to be pilot.

In response to market risks, various brokerage programs have designed a liquidation system. The securities dealers in Shanghai said that if the broker bought the shares at a discount, if the market capitalization of the trading assets fell rapidly, the broker would ask the customer to make redemption in advance according to the contract, and if the securities could not be redeemed in advance, the broker would be forced to liquidate the stock. In addition, the Shanghai Stock Exchange and various brokerages are still exploring ways to increase customer's "margin", but the specific rules have not yet been finalized.

Stock repurchase as a means of short-term financing, on the one hand, helps enterprises to supplement operating capital, on the other hand, it also broadens the sources of income of securities firms.

In each broker's scheme, the financing period is 3 months, 6 months, 9 months and 12 months, but not more than 1 years.

The amount of funds that customers can integrate into securities firms depends on the stock assets they offer, and there are differences in discounts between different stocks. Interest rates on customer financing will also depend on customer credit. It is understood that the Shanghai Stock Exchange has not set a unified standard for the discount rate and financing interest rate of the underlying stocks, and the securities dealers have greater autonomy.

A head of a brokerage firm in Shenzhen said that there would be a range of shares that could participate in buyout repo transactions, which is theoretically larger than the 90 underlying securities issued by margin trading.

Stock buyout repurchase transactions will be traded through the Shanghai Stock Exchange's block trading platform. A person close to the Shanghai Stock Exchange revealed that the Shanghai Stock Exchange has liberalized some trading platform rules for the brokerage business.

However, constrained by net capital, it is foreseeable that this business can produce relatively little capital at the beginning of the business. The head of the wind control department of a large brokerage firm said that the contribution of the business to the profitability of the broker was also negligible.