Five Securities Companies Have Been Approved To Be Independent Lead Underwriters Of Inter-Bank Bond Market, And The Competition Pattern Of Short-Term Financing Market Will Be Broken

Five securities companies were approved to independently underwrite bonds in the interbank market.

Recently, the China Association of interbank market dealers (hereinafter referred to as the association of dealers) issued the notice on matters related to the independent development of the main underwriting business by the principal underwriters of securities companies to securities companies. According to the notice, CICC, Everbright Securities, China construction investment, Huatai Securities and Guoxin Securities can independently carry out the main underwriting business of debt financing instruments of non-financial enterprises after investigation and evaluation by the association of interbank market dealers.

In this regard, a relevant person in charge of the above-mentioned five securities companies confirmed the content of the document to the reporter of the 21st century economic report. The person in charge said, "in the past, some securities companies have the qualification of lead underwriters, but now this is the qualification of independent main contractor. In the future, securities companies with independent principal undertaking qualification can independently underwrite short-term financing bonds, medium-term notes and other projects in the inter-bank market, and do not need to cooperate with banks to act as joint lead underwriters. "

In addition, in the view of this person in charge, this is also a further clear measure for bond market interconnection after the interconnection and cooperation between the inter-bank bond market and the relevant infrastructure institutions of the exchange bond market.

Securities companies enter into the independent undertaking of inter-bank bonds

"This qualification is still very powerful. In the past, we needed to bring a bank to do inter-bank products, but now we can do it ourselves. It's not that the banks are hard to find, but they can get at least 30% of the underwriting fee by doing nothing. " A Chinese bond underwriter told the 21st century economic reporter.

According to wind data statistics, from the beginning of 2020 to now, the total issuance scale of short-term financing bonds in the inter-bank market is 4.92 trillion yuan, of which, the scale mainly underwritten by securities companies is 101.249 billion yuan, accounting for only 2.1% of the total scale. Only CSCI, Huatai Securities and CITIC Securities had a lead underwriting scale of more than 10 billion yuan, reaching 27.445 billion yuan, 13.475 billion yuan and 12.173 billion yuan respectively. In terms of medium-term notes, the performance of securities companies was slightly better, with a total underwriting amount of 301.782 billion yuan, accounting for 13% of the total scale of 2.32 trillion yuan.

"The products in the inter-bank market are still dominated by banks. Banks should allocate at least 70% of the bonds they underwrite with funds. They can not only earn income from intermediary business, but also earn interest margins. They have unique advantages, and securities companies can only earn underwriting fees. Liberalizing the qualification of independent principal underwriters of securities companies will have some shocks to the market in the short term, but the overall pattern is difficult to change. " Said the underwriters.

According to public information, the interbank bond market is the largest bond issuance market and the most active bond trading market in China. It is operated and managed by the association of dealers. The "debt financing tool for non-financial enterprises in the inter-bank bond market" is one of the most important bond products. According to the information released on the official website of the association of dealers, there are currently 68 lead underwriters of debt financing instruments of non-financial enterprises, of which 12 are securities companies.

As early as 2005, CITIC Securities and CICC obtained the qualification of lead underwriters after being recommended by members of the interbank market and recognized by the people's Bank of China. By November 2012, the association of securities dealers launched the market evaluation of the main underwriting business of debt financing instruments for non-financial enterprises. The main underwriter team was further opened to securities companies. In that year, 10 securities companies were approved, namely Guotai Junan, China Merchants Securities, Everbright Securities, China construction investment securities, Guangfa securities, Dongfang securities, Haitong Securities, Huatai Securities and Yin He securities and Guoxin Securities.

Just on November 27, the association of dealers just launched the market evaluation of the main underwriting business of debt financing instruments of non-financial enterprises by members of securities companies. The market evaluation index system includes three kinds of indexes: institution qualification and business evaluation, market evaluation and the evaluation of the Secretariat of dealers association.

"After the first five securities companies have obtained the qualification of independent bond underwriting in the inter-bank market, it is expected that the qualification will be further liberalized, just like the current lead underwriting qualification, to form a systematic access condition." Domestic small and medium-sized securities firm fixed income analysts said.

Bond market connectivity continues to advance

From the perspective of the industry, the five securities companies have obtained the qualification of independent underwriting bonds in the inter-bank market, which is also the performance of the continuous promotion of interconnection in the bond market in recent years.

In November 2018, the people's Bank of China, the China Securities Regulatory Commission and the development and Reform Commission jointly issued the opinions on Further Strengthening the law enforcement of the bond market, taking the lead in promoting the interconnection of the bond market from the law enforcement level.

In August 2019, the people's Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission jointly issued a notice to expand the scope of banks participating in bond trading in the stock exchange and allow banks to participate in the net price trading of bonds in the exchange market. Then, in November, the four ministries and commissions jointly issued the Interim Measures on the management of credit rating industry to build a unified regulatory framework for the credit rating industry in the bond market.

By January this year, the Shanghai and Shenzhen exchanges have expanded the scope of banks involved in bond trading. On July 19, the people's Bank of China and the China Securities Regulatory Commission officially agreed to carry out interconnection cooperation between the inter-bank bond market and the relevant infrastructure institutions of the exchange bond market.

Chen Li, chief economist of Sichuan Financial Securities Co., Ltd., said that at present, the two major bond markets are in a state of institutional segmentation, and there are differences in product design, pricing mode and investor range of corporate debt financing, which indirectly increases the comprehensive cost of corporate debt financing. The two bond markets are interconnected. The inter-bank bond market and the electronic trading platform of the exchange bond market can jointly provide bond trading and other services for investors. The expansion of the investment scope of the exchange bond market will help financial institutional investors form benign competition in the unified market, and indirectly promote the financial system to yield profits to real enterprises.

Dongfang Jincheng, a rating company, points out that interconnection involves many aspects, and it will take time to realize all-round interconnection. On the one hand, bond market interworking needs the design of top-level mechanism and structure, and the further improvement of relevant legal system. For example, the unification of the upper law has not yet been realized between the inter-bank bond market and the exchange market. On the other hand, the interconnection of listing and trading, information disclosure, custody and settlement infrastructure needs a construction process, so as to gradually form the convergence of bond market infrastructure, and enhance the comprehensibility and market convenience.

"The opening of the qualification of independent lead underwriters in the inter-bank market is also a key step in the interconnection between bond markets." According to the above fixed income analysts, with the market interconnection and the liberalization of the access qualification of the lead underwriter, all participants in the bond market will enter the other side's market, intensify market competition, and the industry concentration may be further improved. "This competition is also expected to drive down the financing costs of issuers and help the bond market support the real economy."

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