The Research Of Enterprises’ Financial Risk Control Related To Margin Trading

Margin trading is the kind of business that qualified security companies lend money to customers for their security purchase or lend securities to customers for their short selling while claiming a certain percentage of collateral. As a means of transaction in the security market, margin trading has a history of hundreds years in the Europe and other developed security markets. In China the security market started late and In the March31,2010the Shanghai Stock Exchange officially opened the margin trading system and began to accept the margin trading declaration from pilot members, which marks the official launch of margin trading business. Margin trading has made remarkable achievements in China despite of its short history. As of April30,2014, the balance of margin trading is396.549billion Yuan. The number of security companies qualified to margin trading has increased to87. The cumulative number of credit securities account is3.368million and the number of customers participated in margin trading is1.726million. Besides, the number of securities able to serve as collateral is3255and the number of securities able to be traded in margin transactions is700. All these numbers indicate great market activity and investor participation.Margin trading provides a two-way trade mechanism in the market, helps to active the security trading and enhances the liquidity of the security market. Meanwhile margin trading is a kind of risky business and its leverage feature and force open feature amplifies the risk and aggravates the consequences of the risk. So it is very important to analyze, prevent and control the financial risk related to a company’s margin trading business. By means of theory study and case study, this paper bases on the theme of enterprise’s financial risk control when participating margin trading and makes related recommendations for financial risk control.This paper describes the current situation of China’s margin trading business. Then, we introduce the operation flow of margin trading and theoretically analyze the companies’ financial risk related to margin trading. In addition to combining the stock warehouse explosion incident of ChangJiu Biochemical Industry, we dig the financial risk related to margin trading. Last, we put forward our proposal of preventing the financial risk related to margin trading.