Research On D Securities Company Margin Trading And Short Selling Business Risk Control

Margin trading and short selling business makes significant contributions to the mechanism of price stabilization,price discovery refinement,activity and liquidity enhancement of the market,as well as to the business innovation and transformation of the security companies.However,compared to traditional securities trading,the leverage effect enlarges the risk of both securities companies and investors along with market risk,credit risk and liquidity risk.With no fully functional margin trading and short selling business risk control system,securities companies cannot make a balance between controlling business risk and making more profits while maintaining the stability of the financial market.Under this circumstance,this paper reviews margin trading business history of development,business rules improvement,business characters and risk control common issues within the industry in the last decade.Firstly,the paper chooses D securities company as an instance,analyzing its margin trading business risk management among different business links and risk control measures based on comprehensive risk management theory,and finds out outstanding problems among these steps.Secondly,this paper utilizes flow-chart method to recognize various risk types among different business links.Qualitative analysis part adopts Delphi Expert Evaluation method to sort risk types based on their probability and impact,and a risk matrix figure will be presented.Quantitative part uses pressure test model to measure and sort market risk and scale risk,and expected-loss model to measure credit risk.The sorted result will then be compared with the qualitative one to find out the risk types with high priorities.Finally,refinement measures focusing on credit risk,market risk,scale risk will be proposed in margin trading and short selling business control structure,enhanced underlying instruments,refined customer suitability management and customer credit rating towards margin trading business risk management in D securities company in order to help D securities company generate more profits while properly control operation risk,and hopefully for further reference for other securities companies.