"Carrier Class" Brokers To Develop Path Guess: State Capital Plus + Capital Intermediary Breakthrough

The distance between China's securities industry and the cultivation of "aircraft carrier" institutions is decreasing.

A few days ago, the SFC announced the proposal on the 3353rd meeting of the thirteen National Committee of the Chinese people's Political Consultative Conference (CPPCC), No. 3353rd (Finance and taxation, financial 280), that is, the reply to the proposal on strengthening, making bigger and bigger aircraft carriers, and constructing a capital market, four columns and eight columns to ensure financial security.

According to the securities brokers close to the regulatory level, the CPPCC proposal and regulatory measures mentioned above are related to a stronger securities industry in the process of capital market reform. On the other hand, the "carrier class" securities business will also further enhance the ability of the non banking market to prevent and defuse financial risks.

In the eyes of the industry, the "carrier class" broker will break through two dimensions: attracting state capital, injecting capital into social capital and broadening the scope of brokerage business.

Pain of body mass

The carrier class organization, which breeds the securities industry, has become one of the objectives of the SFC.

In reply letter, the SFC said that "to promote the development of carrier class securities companies" has actively carried out at least six jobs, including encouraging and guiding securities companies to enrich capital, enrich service functions, optimize incentive and restraint mechanisms, increase investment in technology and innovation, improve international layout, and strengthen compliance risk management and control.

It is worth mentioning that, compared with other financial industries such as banks, insurance and other international investment banks, the biggest pain of domestic securities companies is the lack of capital volume.

"The securities industry itself is born out of the banking industry, so the natural volume is not large. With these years of industry consolidation and risk events, the leverage ratio of the securities companies has not been opened, and the net capital capability has not kept pace with the development of the market." A broker who is close to the regulatory level said, "the key is that the securities companies and the securities industry are too small. The size of the net assets of a broker who comes from the first tier is almost the same as the volume of the two or three tier city city commercial banks."

"The volume of the industry is insufficient, so the ability to fight financial risks is very limited." The broker said frankly, "in recent years, stock market, bond market, stock pledge business appeared liquidity risk, non silver credit stratification and other events, all exposed the weakness in the securities industry."

In its view, the exposure of many securities industry risk events has been faster and deeper, and it has to be introduced to other systems such as commercial banks, state assets and other systems. "The self-help ability of the securities industry is very poor. In 2015, the stock market hit the stock market, and the collective investment was put into the stock market. As a result, it did not stabilize the market. Finally, the bank provided liquidity to the certification company. Last year's stock pledge, all over the world, a relief fund was set up to solve the liquidity problem, which is the result of "weak strength" in the securities industry.

"Water diversion" should be strengthened

For this pain point, the specific direction of the securities and Futures Commission to guide the securities industry to strengthen its capital strength is also gradually floating, that is, the introduction of all kinds of state-owned capital to participate in capital injection. "In view of the proposal to" substantially increase the capital investment of large state-owned head broker companies in the form of social security funds, Huijin and CIC ", I will actively support all kinds of state capital to invest in securities companies through subscription of preferred stock, common stock, convertible bonds and subordinated debt under the premise of compliance with the law, so as to promote the securities industry to become bigger and stronger.

"No matter from the proposal or from the statement in the meeting, state assets have become a feasible direction for the capital injection industry." "The enthusiasm of private equity participation in securities investment in Beijing has been decreasing in recent years, and the new equity management approach has added some barriers to private capital entering the securities industry," said a non bank financial analyst at a medium-sized brokerage in Hong Kong.

"Introducing new sources of water, such as state-owned capital, is obviously the most direct way to scale the industry." The above analysts pointed out that "the preferred stock, common stock and convertible bonds can also enhance the capital strength of securities companies."

But in its view, pure state capital injection mode is not easy to make.

"The biggest problem of state ownership is also a question of willingness, unless there is a higher level of financial management or financial departments to coordinate." The above non bank analysts said frankly, "in order to solve the problem of bank listing, there was a pattern of foreign capital injection, but the same way may not apply in the securities industry, because the securities dealers are facing more market risks at the operational level, and the valuation level of securities firms is also higher than that of banks."

According to the statistics of Wind, the average net market rate of the securities companies in China was 1.54 times as of December 2nd, while the rolling price earnings ratio was 25 times, while the average market price and rolling price earnings ratio of banks in the same period were only 0.82 times and 6.5 times respectively.

"If the state-owned assets are involved in a relatively high price, they will often have more stringent capital investment approval, and whether this injection can bring forward long-term returns will also be considered by different state-owned assets." A state-owned enterprise participant in securities brokerage pointed out.

"The key is to let all parties involved in the capital injection get the corresponding rewards so that we can see that this is a good thing." The official admitted that "because the financial system or state assets are not directly responsible for the strong securities industry, if they participate or have more high-level coordination and policy support, or this matter itself is very attractive."

Business disruption

How to attract state assets or other social capital to participate in the securities industry's capital increase is undoubtedly the key to building "carrier class" securities dealers.

In some industry circles, the way to break the situation is to give the head broker more diversified and innovative capital business through the classified management of securities companies.

"If the conditions give the head broker more business space and business capability, it will open up new growth points for the existing industries, which will inevitably attract strong attraction to state assets and social capital." An investment bank in Shanghai said.

The SFC also said in its reply letter that it will enrich the service function of securities dealers. "Encourage securities companies to customer-centric, revitalize customer stock assets in accordance with the law, develop counter market transactions, pilot credit derivatives, OTC options, cross border derivatives and foreign exchange and other businesses, research and promote M & A financing, further improve and deepen asset pricing, risk management and customer oriented comprehensive service capabilities."

In the industry view, this expression means that the space for brokerage intermediary business is expected to be further expanded.

"Brokers are big and wealthy, and the key is to see how they can be used and how they can help the development of the industry." Aforementioned non bank financial analysts said, "from the development experience of the securities industry in mature market countries, large brokerages often rely on powerful capital intermediaries to drive development capability. In short, commercial capital plays a role as market maker, counterparty and liquidity provider in the market. This role has a natural requirement on body size."

In fact, for the securities companies currently dominated by brokerage business, there is still a long way to go to strengthen the "capital intermediary".

"The capital expansion and account system innovation of securities companies have always been a curse, that is, the implementation of the third party securities account custodian system for many years, but at this stage whether the pilot can open this restriction, there is also controversy in the industry." The analysts said frankly.

In addition, the predictable nature of regulatory policies also plays an important role in changing the industry pattern.

"What kind of attitude will the key regulators face in the capital innovation of the securities industry? In the past few years, the brokerage business has largely fallen into a cycle of" letting go, killing and killing. " The securities brokers close to the regulators said frankly: "a key point in the last round of capital intermediary business is stock pledge. The result is 18 years of risk. This time, how will the regulatory authorities balance innovation development and risk control, and it will also become a huge challenge."