Risk Control And Management Of China 's Securities Dealers' Margin Trading

Security margin trading has been an innovative business in China’s capital market in recent years. The issue of measures for the management of security margin trading business by CSRC in June 2006 initiated China’s experiments in Security margin trading. The publication of the six security traders in March 2016 indicates the beginning of its operating practice.Security margin trading has been in practice for nearly one hundred years in developed countries and regions. Taiwan of China, the USA, and Japan have cultivated three different modes of security trading and established sophisticated operating rules and systems of risk management and control. China’s security margin trading has a comparatively short history, but it has increased supply of capital and security in the market, and solved the problem of one-tier long mechanism resulted from the lack of short tools. To security traders, it stimulates their innovation of profiting modes and enhances their running circumstances. Meanwhile, the risks brought about by security margin trading should not be neglected, especially to an unsophisticated market like that of China, in which risks of law issues, capital movements, and out-of-control of business scales are what we have to deal with. Therefore, this thesis intends to investigate methods of efficient control of the risks of security margin trading, and to work out regulations of management, so that security margin trading, through regulations of systems and technical methods, could play a healthy role in the stock market. This thesis also conducts a research of the methods of risk control and management in the three modes of security trading practiced in Taiwan of China, the USA, and Japan, which is to provide experience and insights for the development of security margin trading in today’s China.After theoretical rationalization and macroscopic analysis, this thesis conducts a study on GT Security Company as a sample. After a field study and statistic analysis, and a meticulous research of the principles and systems of risk management established in the company’s security margin trading business, my study reveals that the company’s success in controlling and preventing risks of security trading depends on specific relevant measures, such as customer suitability management, underlying securities management, risk management reporting mechanism, additional guarantees and disposal of breach of contract, etc.Through an analysis of the measures GT Security Company takes in operating security margin trading and the problems in China’s development of the business, this thesis argues that China’s security margin trading has a great future, but it is still in the initial stage of development during which operation is not normalized and supporting regulations need to be laid down. This thesis also suggests that the management organs of the market should be equipped with new legislative ideas and strengthen its effective management of the security market through proper administrative measures. It is imperative for all participants in the market to ensure its healthy growth and development. Furthermore, through proposing ways to lay down specific regulations and systems, this thesis aims at helping establish risk management and control system suitable for the present China and its market, so that security margin trading may serve the security market better and enhance its healthy development.