Pan Xiangdong: improve system supply and steadily promote the implementation of t + 0 trading system

 Pan Xiangdong: improve system supply and steadily promote the implementation of t + 0 trading system

The t + 0 trading system is not new to the A-share market. In fact, it was implemented as early as the establishment of the A-share market. Among them, the implementation period of the Shanghai Stock Exchange was from May 1, 1992 to December 31, 1994, and the Shenzhen Stock Exchange was also implemented from November 22, 1993 to the end of 1994. But at that time, the regulatory authorities thought that the speculative nature of the stock market was too strong. In order to curb excessive speculation and the sharp fluctuation of the stock price, and protect the interests of small and medium-sized investors, the regulatory authorities finally decided to implement the t + 1 trading system from January 1, 1995. Although there were many arguments about breaking the t + 1 trading system in the history, the trading system has continued to this day.

At one time, the t + 1 trading system played an important role in Chinas A-share market. It was mainly based on the fact that at the beginning of the establishment of Chinas stock market, the number of retail investors was large, and the phenomenon of blindly following the trend was serious. In addition, the number of listed companies was limited at that time, and the quality was also uneven. Retail investors lacked independent judgment ability and basic investment knowledge, which led to the phenomenon of early stock markets sudden rise and fall Occurs frequently. Therefore, under the t + 1 trading system, the speculation of ordinary investors is effectively limited, the rational investment behavior of investors is gradually cultivated, and the phenomenon of speculation upsurge and blind following is slowed down. However, with the increase of the number of institutional investors in the A-share market, the introduction of quantitative trading and margin trading systems, the disadvantages of the t + 1 trading system are gradually emerging:

First, the t + 1 trading system improves the opportunity cost of ordinary investors, reduces the circulation speed and use efficiency of funds, reduces the liquidity of stocks, and produces low liquidity discount, which is not conducive to the improvement of capital allocation efficiency in the stock market. Invisibly, because ordinary investors cant sell the stocks they bought on that day, they may miss better investment opportunities and increase the opportunity cost of ordinary investors.

Second, the t + 1 trading system limits the ability of ordinary investors to correct errors, especially in the face of unexpected problems such as erroneous orders and system failures, when investors are unable to take remedial measures to avoid risks, similar to the 2013 Everbright Wulong index and other emergencies, due to the lack of timely corrective measures, market risks increase. For institutional investors, they can also make up for losses through stock index futures, ETF fund arbitrage, reverse operation of margin trading, etc.; but for small and medium-sized investors, they can only passively accept losses.

Third, the spillover effect of different markets significantly increases the risk of small and medium-sized investors. At present, Chinas convertible bond market, stock index futures market and former warrant market all adopt t + 0 transaction, while Chinas stock spot market adopts t + 1 transaction. Due to the spillover effect of liquidity in different markets, if the convertible bond market has collapsed, small and medium-sized investors cant sell the stocks they bought on the same day, so they can only bear the losses on the same day and hope that the future price rise of stocks on the spot will reduce the losses, which leads to small and medium-sized investors only have a long investment strategy, thus significantly increasing the risk of small and medium-sized investors.

Fourth, under the background of quantitative trading and multiple market arbitrage opportunities, the t + 1 trading system has led retail investors to be reaped by institutional investors. At present, Chinas institutional investors are rich in tools, especially through quantitative trading, which has broken the traditional t + 1 trading system constraints. Institutional investors can take advantage of the liquidity differences in different markets and the changes in asset prices to crack down on retail investors and other single market investors.

At present, the number of long-term investors in Chinas A-share market is increasing, and the scale of rational investors is growing significantly. Most of the international capital markets implement the t + 0 transaction settlement system: first, significantly reduce the opportunity cost of ordinary investors, improve the transaction efficiency, and significantly increase the liquidity of the market; the t + 0 transaction system will realize multiple transactions of a fund, and the transaction scale will be It will increase significantly and improve the liquidity of the stock market.

Second, it improves the error correction ability of ordinary investors and enriches their strategies. Especially after ordinary investors buy shares on the same day, they find that there is a mistake in stock selection, which can stop losses in time and avoid further expansion of risks and losses.

Third, enrich investor strategies. T + 0 trading mode can realize seamless docking of stock market, convertible bond market and stock index futures market, so as to reduce the spillover effect of different markets. Through asset allocation, ordinary investors can hedge between different markets to avoid a certain range of market risks, which is also conducive to the promotion of quantitative trading mode in the A-share market.

Fourth, the t + 0 transaction will reduce the transaction risk, increase the traditional brokerage business income and commission income of securities companies, and benefit securities companies. As investors can buy or sell stocks in one trading day in t + 0 trading, it will significantly improve the trading volume of Chinas capital market, thus increasing the traditional commission income of securities companies, and under the promotion of margin trading, it will also increase the level of credit income, so as to realize the expansion of the asset scale of securities companies, and provide more market maker funds and qualified institutional investors for the market It also helps to guide the inflow of overseas funds, cultivate rational investors and reduce the transaction risk of the market.

Of course, we should also see that t + 0 and T + 1 are just trading systems themselves, which is a neutral concept, and there is no question of which is better or worse, but the trading systems adopted will be different due to the different needs of the capital market at different stages of development. Therefore, we should not only see the positive impact of the t + 1 trading system on suppressing speculation in Chinas capital market, but also see that with the further development of the A-share market, especially under the background of the gradual implementation of the margin trading system and the registration system, t + 1 trading system will significantly increase the intensity of market price volatility under the margin trading system. Especially in the context of unilateral market decline, it will lead to market liquidity loss and further increase market risk.

Therefore, at the time of the opening of the science and technology innovation board, the Shanghai Stock Exchange will launch the market maker system in time, research and introduce a single t + 0 transaction, improve the liquidity of the market, so as to ensure the normal realization of the price discovery function of the science and technology innovation board market. At the same time, after the success of the t + 0 trading system in the pilot of the science and technology innovation board, it will gradually promote to the gem and the main board market, which will significantly increase the traditional brokerage business income and credit business income level of the securities companies. Under the background of keeping the A-share market stable and orderly, the A-share market will gradually integrate with the international capital market, so as to improve the efficiency of capital use and reduce transaction risk To better promote high-quality economic development.

This article is the exclusive contribution of Netease Research Bureau and does not constitute an investment decision.

Produced by Netease Research Bureau (wechat Company No.: wyyjj163)

Netease Research Bureau is a professional financial think tank created by Netease News. It integrates the original multimedia matrix of Netease financial, relies on the wisdom of hundreds of top economists at home and abroad, analyzes and interprets the hot topics of economics rationally and objectively, and creates a forward financial think tank with an attitude. Welcome to contribute (email: [email protected] uff09u3002

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