On the evening of October 14, China Merchants Securities, Dongwu Securities and Industrial Securities announced that the qualifications for listed securities market-making trading business have been approved by the China Securities Regulatory Commission.

Science Innovation Board Visual China Data map

Science Innovation Board is about to usher in the second batch of market makers!

Previously, on the evening of October 13, CITIC Securities (600030.SH, 06030.HK), Guotai Junan Securities (601211.SH, 02611.HK) also announced that the qualifications for listed securities market-making trading business have been approved by the China Securities Regulatory Commission.

Pengpai News reporter learned that the second batch of 6 brokerages' market makers qualifications were recently approved, namely CITIC Securities, Guotai Junan , China Merchants Securities, Dongwu Securities, Industrial Securities, and Zhejiang Securities (601878.SH). So far, with the 8 securities companies that were approved for market maker qualifications on September 15, the number of market makers on the Science and Technology Innovation Board has expanded to 14.

Science and Innovation Board market makers continue to expand

Science and Innovation Board market makers have actively become market makers of the Science and Technology Innovation Board.

According to the "Pilot Regulations on the Market Making and Trading Business of Securities Companies on Science and Technology Innovation Board" (hereinafter referred to as the "Pilot Regulations") issued by the China Securities Regulatory Commission on May 13, 2022, securities companies (i.e. market makers) that meet the conditions of net capital that has not less than 10 billion yuan in the past 12 months and have been classified and rated at Class A (inclusive) or above in the past three years, and who have obtained the qualification for market-making trading business of listed securities approved by the China Securities Regulatory Commission, can pilot engaging in the Stock Market Making and Trading Business of Science and Technology Innovation Board.

According to Tang Shengqiao, executive director of the Derivative Investment Department of China Merchants Securities, securities companies that meet the requirements in the market are preparing to apply for market-making business qualifications on the Science and Technology Innovation Board.

is in addition to 14 approved securities firms, some securities firms are actively seeking market maker qualifications on the Science and Technology Innovation Board. The reporter sorted out the announcement and found that brokerages such as Founder Securities (601901.SH), Everbright Securities (601788.SH, 06178.HK), Tianfeng Securities (601162.SH) have also passed proposals to apply for the implementation of the Science and Technology Innovation Board stock market-making trading business at the board of directors or shareholders' meeting.

What changes will happen to the first batch of securities companies with pilot qualifications? Tang Shengqiao believes that since the Science and Technology Innovation Board stock market-making trading business is still in the pilot stage, it may not bring significant profit changes to the company in the early stage of obtaining the "qualification certificate", but it only adds a piece of business. I believe that with the expansion of the pilot in the future, the revenue weight of this business in the company will gradually increase.

"In the early stage of business development, the primary goal of market makers is to maintain market stability and provide liquidity for the market. The source of profit may be mainly exchange market making service incentives." China Merchants Securities further pointed out that with the increase in the number and business scale of market makers and the enrichment of risk hedging methods, the continuous optimization of market makers will enable market makers to obtain profits from combinations of market makers such as holdings and trading, such as holdings and trading in addition to exchange incentives.

Haitong Securities research report also pointed out that being approved for market making on the Science and Technology Innovation Board will help transform the traditional business model that was biased in the past and further strengthen the capitalization transformation of investment banks. By integrating capital, investment research and trading advantages, optimizing profit models and enriching profit sources, securities firms are expected to usher in high-quality and sustainable development.

Securities companies focus on market making business on the Science and Technology Innovation Board in multiple dimensions

after they are approved, how will securities companies carry out market making business?

According to Wu Chenggen, chairman of Zhejiang Securities, before the qualification of "listed securities market making trading business" was approved, Zhejiang Securities had carried out market making business on the New Third Board and interbank bond market making business, achieving good results, cultivating a professional team, and making relatively sufficient preliminary preparations for the market making business on listed securities.

China Merchants Securities expects that the business model will mainly use its own funds to buy market-making targets in the early stage. The process of this model is simple and efficient. You only need to buy through the secondary market to obtain market-making positions; the trading mechanism is mainly quoted in the early stage, that is, market makers provide continuous buying and selling quotations to the market during the continuous bidding period, and the inquiry will provide part of the liquidity as a supplement to the quotation.

specifically for market-making targets, China Merchants Securities pointed out that according to the "Implementation Rules for the Shanghai Stock Exchange Science and Technology Innovation Board Stock Market-making Trading Business", the selection of market-making targets will mainly be based on business needs, focusing on providing market-making services for the company as a sponsor and during the continuous supervision period. Secondly, the company will select market-making targets from the , the Technological Innovation 50 Index component stocks, which are good in the company's fundamentals, industry representativeness and secondary market liquidity. In addition, the company will provide market-making services for stocks that need to improve liquidity in the Science and Technology Innovation Board market in light of improving liquidity.

Next, Zhejiang Securities stated that it will mobilize comprehensive resources in terms of systems, personnel, funds, equipment, technology and venues, and make serious preparations for the launch of the Science and Technology Innovation Board market-making business, and help the mixed market-making of the Science and Technology Innovation Board to carry out smoothly.

The market maker system of the Science and Technology Innovation Board is being implemented at an accelerated pace, and many parties benefit from it

With the expansion of market makers on the Science and Technology Innovation Board, the market maker system of the Science and Technology Innovation Board is also being implemented at an accelerated pace. What changes are expected to bring to the capital market?

Referring to the New Third Board, Zhejiang Securities pointed out that the market-making trading system can effectively improve the liquidity of stocks. Market-making trading on the New Third Board has obvious liquidity advantages over call auction trading. Judging from the turnover rate, the average monthly turnover rate of market making transactions reached 1.658%, and the turnover rate of call auction transactions was 0.421%.

"The introduction of the mixed trading system of market makers on the Science and Technology Innovation Board is a major innovation in my country's stock market trading system." Wu Chenggen further pointed out that the introduction of market makers can not only improve the liquidity of stocks and reduce the volatility of stock prices, but also lay the foundation for other sectors to introduce the market makers system .

For companies listed on the Science and Technology Innovation Board, Tang Shengqiao believes that securities companies can provide them with all-round and full-chain intermediary services from underwriting and sponsorship to research consultation to trading market making. At the same time, all listed companies on the Science and Technology Innovation Board are technologically innovative enterprises, and the market needs to give a high valuation premium to better develop their business. The introduction of the market maker mechanism can give full play to the direct financing function, allocate social resources more effectively, and attract social capital to invest in key areas such as national scientific and technological innovation.

"The market maker business of the Science and Technology Innovation Board provides a more diversified and comprehensive financing channel for my country's market development." Datong Securities research report also pointed out that the market maker business of the Science and Technology Innovation Board is a major development of securities companies' proprietary business, which will help to develop securities companies' innovation related businesses and carry out diversified business development models.

Western Securities also believes that market maker trading, as a new business, has high requirements for the comprehensive financial service capabilities of securities companies and sets entry thresholds, which is expected to become the performance growth point of leading securities companies.