A Study On The Risk Control Of Margin Trading Business Of Dongxing Securities

Since its debut in China’s capital market in2010, margin trading business hasmade rapid progress in China. The margin trading business has acted an active role inimproving market trading mechanism, regulating market operation, increasinginvestment channels and risk-averse approaches for the investors, and enrichingbusiness varieties and increasing gains for securities companies, etc., and also arousedconsiderable risks. Under the circumstances where the continued development ofmargin trading business is inevitable, as one of the most prominent participators inmargin trading business, the securities companies are bound to experiencedeteriorating development if they fail to effectively handle such risks. However, aftera careful survey of the existing literature, we are unfortunate to find that there arehardly any researches that are relevant to the practice of risk control of securitiescompanies themselves. Therefore, what we have presented in this paper, namely, theproblem of dealing with the risks of margin trading business from the angle ofsecurities companies with the practical operation experiences of DongXing SecuriteisCo. Ltd. as our basis, obviously has far-reaching implications both in theory and inpractice.In this paper, first of all, we offered a brief introduction of the concepts, thebusiness processes, the characteristics, the prerequisites and the functions of margintrading business, and we found that such features and functions on one handdetermine the necessities to carry out margin trading businesses, and on the otherhand lead to the various risks mentioned above. Later, with accordance to the practicaloperation experiences of DongXing Securities, we sorted out the various potentialrisks that would be probably encountered, and figured out their possible causes andcharacteristics, and all these efforts undoubtedly provided insights when we discussedthe proper risk countermeasures. Later, based on the previous research, according tothe current situation of the existing risk control system of Dongxing Securities, weportrayed a blueprint to optimize that system from the angle of internal businessprocedure,, hoping to offer a practicable proposal for DongXing Securities in riskcontrols. And last but not the least, we also discussed several safeguards which arecrucial to the effectiveness of the above proposed risk control schemes.