Market Impact And Model Selection Of Margin Financing And Securities Lending System

China's securities market has developed rapidly since its formally establishment in 1990. It only experienced a comparatively short period of time to develop which took the western developed countries dozens of years to achieve. The market size and the advancement of its transaction system can be called "world-class" at present. However, issues occurred and existed in the market in the last twenty years such as the significant fluctuation of the stock market and over speculation etc and still haven't been tackled soundly. In addition, the transaction model of China's securities market is rather limited as spot transaction is the only available way in the market for the time being. There is a lack of legitimate financing channel and risk-averting tools in China's securities market. Margin financing and securities lending mechanisms can enhance trading liquidity and trading activeness in the markets. It can create positive effects of improving internal value discovery, effectively collaborate the money market and the capital market, restrain underground financing activity in securities market, provide new profit model and risk management tools for investors etc. The introduction of margin financing and securities lending mechanisms in China's securities market is useful to resolve a basic problem puzzled in recent years and will play an important role in a long-term development to China's securities market.This paper elaborates systematically on the content, function and basic mechanism of margin financing and securities lending transactions, analyzes the gaps of the mechanism between various overseas countries and regions. The paper predicts the specific impacts on the securities market after the introduction of margin financing and securities lending mechanisms with empirical analysis and proves that margin financing and securities lending mechanisms will finally generate positive impact on China's securities market by empirically analyzing other counties practice and experience on margin financing and securities lending transactions. Finally, thoughts and guiding methodology have been made on China's margin financing and securities lending mechanisms on the basis of detailed analysis of overseas margin financing and securities lending mechanisms. Meanwhile, the paper puts forward some suggestion to set up and perfect margin financing and securities lending mechanisms in the future.