The Beijing Stock Exchange (BSE) has announced the official launch of margin trading and securities lending transactions, a move aimed at improving the trading system and boosting liquidity. According to the bourse, eligible securities firms entrusted by investors are to submit declarations for margin trading and securities lending transactions to the BSE from Monday onwards. The launch of these two businesses is seen as a crucial step in enhancing the pricing function of the secondary market.
Margin trading is a process where an investor can buy more stocks than they can afford, using borrowed money from a broker. This type of trading can potentially lead to greater returns for investors, but it is also considered a high-risk strategy. Securities lending is the practice of lending shares of stock, bonds, or other securities to investors, with the aim of generating additional income.
The move is expected to help deepen and broaden China’s capital markets by providing more opportunities for investors and adding diversity to the investment landscape. The BSE was established in 2020 as a new platform for small and medium-sized enterprises, with a focus on high-tech companies. Since its launch, it has attracted significant interest from investors, and now has 169 companies listed, with a combined market value of over 240 billion yuan ($35.35 billion) as of February 10.
The Chinese government has been working to open up its capital markets, as part of broader efforts to make the country more attractive to foreign investors. In November 2020, the Shanghai and Shenzhen stock exchanges relaxed rules for stock index futures trading and launched new index products to increase access for foreign investors. The move to allow margin trading and securities lending on the BSE is the latest step in this direction.
Overall, the launch of margin trading and securities lending transactions is a significant development for the Beijing Stock Exchange, as it is expected to attract more investors and increase liquidity in the secondary market. The move is in line with China’s broader push to open up its capital markets and make them more accessible to investors, both domestic and foreign.