Speculation On Industry Evolution Under The New Classification Regulation Rules Of Securities Companies: Head Broker Is A Leader In Small And Medium Sized Brokerages.

The securities industry has heated discussions about the decision to amend the regulations on the classification and supervision of securities companies.

In fact, this is the third revision of the classification rating of securities companies. The Commission has made two amendments in May 2010 and July 2017.

In twenty-first Century, the economic report combing reporters found that in addition to further implementing and maintaining the SFC's classified evaluation system mainly based on risk management capability and continuous compliance status, it is the core logic behind the rules modification to strengthen the professional service ability of securities companies and guide the differentiation development of securities dealers.

The classification and grading rules and scoring systems designed by the SFC have always been strongly related to the development of brokerages. The revision of the rules will undoubtedly have a great impact on the development pattern of securities dealers in the future.

Deng Shubin, chief economist of Zhongyuan securities, believes that the amendment reflects the intention of the regulatory authorities to the development of the securities industry to a certain extent. That is, the qualified head broker should have a "big pattern" and "big vision" and be a good leader. Color, strength, expertise and quality.

Guiding wealth management transformation

Related to the securities and Futures Commission said that an important direction of the revision of the rules is to adapt to the development of the securities industry, optimize the evaluation index of market competitiveness, guide the securities companies to highlight the main business, do better and better, and promote the differentiated development of the securities industry. Among them, changes in index of brokerage and wealth management are the corresponding adjustments made by regulators to adapt to changes in the securities industry.

One of the main sources of profit for domestic brokerages is broking business, but after 10 years of commission competition, the traditional brokerage business with serious homogenization has become the Red Sea market. In 2018, after the industry downturn following the sharp fluctuations in stock market since 2015, more and more brokerages realized the urgency of wealth management in the transformation of brokerage business.

Regulators obviously hope that the brokerage business will transform to the direction of wealth management, so this rule modification also reflects such a regulatory thinking.

? ? ? Specifically, there are two modifications to the index of broker and wealth management business: adjusting the evaluation index of brokerage business, changing the ranking of the revenue and sale of securities business revenue and the ranking of the business department's average agent sales and securities business income, and amend it to the "ranking of the securities business revenue of the agent" index, ranking the top 5, the top 10 and the top 20 in the industry by two points, 1 points and 0.5 points respectively. 。

In addition, it introduces the evaluation index of wealth management business, that is, investment advisory business and financial products distribution business ranking. "In the past year, the income of investment consulting business or the sales of financial products business in the top 10 industries and the top 20 sectors were increased by 1 points, 0.5 points and two points respectively.

"The adjustment of these two indicators is to integrate brokers and wealth management business indicators, and guide securities companies to strengthen wealth management business transformation." Liu Li, a non banking analyst at Shanxi securities, said.

? ? ? Wei Tao, assistant president of the Huaxi Securities Company and director of the Institute, also pointed out: "in terms of retail business indicators, first of all, the income index of agents buying and selling securities business has abolished the quota of all departments. In the future, the US Edward Jones style, in-depth community oriented, and small-sized boutique wealth management structure of the business department are expected to be supported; secondly, the new wealth management index and the investment advisory business revenue are outstanding. New products will be added to the sale of financial products. This reflects the idea of regulating and guiding the transformation of wealth management industry.

The concept of active management has been mentioned many times in recent years with wealth management. In fact, wealth management and active management also have a certain degree of cross relationship. In the revision of the classification regulation rules, there is also the content corresponding to this concept, that is, retain the index of "information management income ranking", add "asset management business scale" in the industry median, and the scale of asset management product investment equity assets occupy the proportion of asset management business scale. The top 10 in the industry and the top 20 were 1 points and 0.5 points respectively.

"Whether it is to transform wealth management or enhance the ability of active management, the intention of regulators is obvious. It is hoped that securities companies can gradually get rid of the dependence on channel businesses and form the characteristics of services." The head of a self operated business line of a medium-sized brokerage firm in Beijing thinks.

Investment banking evaluation refinement

At the specific level of business, the evaluation of investment banking business is also more detailed in the revision of the rules, and the original index of "underwriting and recommendation and financial advisory business ranking" is refined to two indexes: "underwriting and recommendation business ranking" and "financial advisory business ranking".

"Underwriting and sponsorship income is located in the top 5, the top 10 and the top 20 in the industry, with two points, 1 points and 0.5 points respectively. The financial advisory business income is located in the 10 top 10 companies and 20 20 companies respectively, adding 1 points and 0.5 points respectively.

"Investment banking business income index split to two, underwriting and sponsorship business income, financial advisor business income outstanding can get bonus points, guide investment banking professional development." Wei Tao said.

The evaluation index of investment banking is refined, and it also complies with the development trend of investment banking. In the current market, some brokerages have done a good job in underwriting the sponsor business, and some brokerages have been doing well in mergers and acquisitions. Especially for some small and medium brokerages, it is difficult for the two party businesses to do well. One of the lines is differentiation. The merger of the original index is largely unfavorable to the small and medium sized brokerages on this item, which does not well reflect the purpose of encouraging the differential development of the securities firms.

Wind data also confirm the above statement.

In twenty-first Century, the economic report reporters combed the brokers of the top 20 underwriting sponsor business and financial advisory business in 2019, and found that 3 of the 20 brokerages whose financial advisory business income had entered the top 20 were Ji'nan securities, Northeast Securities and Zhongyuan securities. After the adjustment comes into effect, the three brokerages will benefit directly from the new rules.

In addition, in twenty-first Century, economic news reporters and insiders exchanged views that the evaluation of the investment banking business in the future will be further adjusted with the registration system reform, so as to better guide the securities companies to strengthen the investment banking business in line with the registration requirements.

Taking care of head and differentiation

As a matter of fact, the changes of the above classified regulatory indicators have fully seen the core logic of the revision of the rules. Wei Tao pointed out that under the new regulation, the dominant position of large brokerages is generally unwavering, and the development of securities dealers is encouraged on the margin. Business oriented to encourage wealth management transformation, encourage institutions to become bigger and stronger, and guard against the risk of financing business.

First of all, the core of classified regulation is to encourage the industry's head broker to further strengthen and expand because no matter how the rules are modified, the large brokerage firms get much more points than the small and medium sized brokerages.

? ? In terms of the total scale index of operating income, large brokerages must be dominant. Secondly, ranking of business indicators such as brokers, investment banks, wealth management and information management is still ranked in scale income. Large brokerages also have great advantages. Net asset yield index and risk coverage index also set up a median net profit and more than 20 billion yuan net capital. It is a prerequisite to increase the score. Therefore, large brokerages have absolute advantages. We also support the conclusion by taking the bonus points calculated by the association's published data in 2018. Wei Tao said.

However, under the carrier of the voucher industry, the expectations of regulators for other brokerages are differentiated competition, so they also highlight some bonus points of special businesses, such as mergers and acquisitions, wealth management and other new indicators.

"Such a medium and small brokerages may break through, for example, in the business of financial advisors, the small and medium sized brokerages may get a breakthrough. In 2018, the index of Southwest Securities, XinDa securities and open source securities gained a new bonus. As for the new wealth management business, the income of investment consulting business is not large at present. Some small and medium brokerages are also expected to make breakthroughs in this respect, such as Zhongyuan securities, Guo Rong securities and British securities listed in 2018. This reflects the idea of promoting the characteristic development of securities dealers on the margin of regulation. Wei Tao thinks.

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