Forex Sky Eye APP News: The 500 billion ETF market will usher in another major "big move". According to a reporter from China Fund News, we are currently studying the collective subscription mechanism of ETFs to optimize the subscription arrangements of ETFs to enhance investors' enthusiasm for participating in ETFs.
Many industry respondents said that there are indeed rumors that some fund companies have been designated as pilot projects for this business, and related system adjustments have been made, but this specific plan has not been finalized. At present, the industry's market demand for collective subscription business is difficult to estimate, but it is a consensus in the industry that innovation will further promote the growth and development of ETFs.
The collective subscription mechanism may gradually approach
Recently, Liu Ti, deputy general manager of the Shanghai Stock Exchange, participated in the Shanghai Stock Exchange ETF Summit Forum, ICBC Credit Suisse Fund Special Session, said that in the future, it will continue to promote the steady development of the Shanghai Stock Exchange fund market from several aspects. This includes continuously optimizing the fund trading mechanism, researching and introducing a collective subscription mechanism, and optimizing the subscription arrangements for ETFs. The so-called collective subscription of ETFs refers to the fact that after an ETF is listed, multiple investors are allowed to use single or multiple component coupons to subscribe to the share of ETFs without damaging the interests of the original holders. This mechanism is a useful supplement to the existing subscription and subscription mechanisms of ETFs and helps to increase investors' enthusiasm for participation.
"At present, I heard that the exchange has designated several fund companies as the first batch of pilot projects, and the companies they are located are not on the list." An industry insider said.
. Another product person said that there is indeed this rumor at present and relevant rules are being formulated. According to him, there are reports that it is currently the four companies in Shanghai and Shenzhen as a pilot project. It may mainly examine the scale, liquidity, operating time, etc. ETFs with large scale, long operating time and good liquidity have more hope to enter the pilot list.
Another industry insider said that the launch of the collective subscription mechanism will definitely involve the modification of the fund company system, and it has basically been modified.
"The plan for collective subscription has not been officially determined, but 'protecting the interests of the original holders' is the most important prerequisite for this plan design. It is not known when it will be launched, and it is still in the stage of waiting for the plan to be determined." Some industry insiders said.
In fact, the collective subscription mechanism has been operating in overseas markets for many years. When the first ETF was launched in China, fund companies have reserved "holes" for this mechanism in fund contracts. On November 25, 2014, the first ETF in China, Huaxia Shanghai Stock Exchange 50 ETF, released a prospectus, which mentioned "collective subscription and other services". When conditions permit, the fund manager can open up collective subscription, that is, allowing multiple investors to collect the combined securities they hold, and jointly form the minimum subscription, redemption unit or its integer multiple to subscribe.
Huatai-Pulse Shanghai-Shenzhen 300 ETF, one of the first batch of cross-market ETFs, also has the section "Collective subscription and other services" disclosed in the initial publication of the Huatai-Pulse Shanghai-Shenzhen 300 ETF, which also has the section "Collective subscription and other services": When conditions permit, the fund manager can open up collective subscription, that is, allow multiple investors to collect the combined securities they hold, and jointly form the minimum subscription, redemption unit or its integer multiple to subscribe.
, Penghua CSI Bank ETF, Fuguo CSI All-Indices Securities Company ETF, Taikang CSI 300 ETF and other ETFs that are being issued recently, have reserved collective subscription terms.
"If the old ETF fund wrote the terms of "collective subscription" in the contract before, this rule can also be applied in the future. ETFs that are already operating in the market basically have this clause." An industry insider said.
"Adjust consistent first and then merge into ETFs" collective subscription plan
An industry insider said that unlike the original ETFs during the operation period, investors used a basket of stocks to subscribe, collective subscription operated independently, and several investors used several stocks to subscribe. After the fund company adjusted these stocks to the same as the ETF holdings combination, it was then merged into the fund assets, and the adjustment costs were calculated separately, and the adjustment costs were borne by the investors who exchanged them and would not affect the interests of the original holders. In this process, there is no need to start a new account separately, nor does it need to set up a new fund net value for the exchanged investors. After the adjustment is completed, the fund shares after the exchanged investors are confirmed, and the more they are refunded or subsidized.Compared with the ETF issuance period exchange, the regulatory authorities have provided window guidance on the ETF issuance period exchange, and the ETF purchase ratio shall not exceed the index weight.
industry speculates that in the future, collective subscription only needs to meet the new rules for reducing holdings. Through the mechanism innovation of "adjustment and then merged into fund assets", it is enough to protect the interests of the original holders of ETFs. There is no need to limit the share exchange ratio to the ETF weight, but the final plan remains to be determined by the exchange and regulatory authorities.
"Compared to the exchange during ETFIPO, ETF stock collective subscription has more advantages, and will not affect the net value of the fund and will not affect the interests of the original holders." According to the above-mentioned product person.
Another industry insider said that ETF collection subscription is not open every day, but is open regularly, but the final plan is not determined. In short, collective subscription refers to adjusting the exchanged stocks to the same as the fund's holdings and then merging them into the fund's assets. This process is completed through accounting and accounting receivables and payables, and the cost of adjustment is borne by the exchange investor. This mechanism does not harm the original holder.
collection subscription is a new expansion made by the ETF through the original mechanism of "a basket of stock subscription", so the threshold for collection subscription is at least higher than the previous basket of subscription lists.
The above industry insiders further stated that in fact, there are no legal obstacles to the launch of collective subscriptions, but there has always been no suitable time to launch collective subscriptions. "At that time, many investors thought it was easier to exchange stock shares during the ETF issuance period. After all, exchange for ETF issuance period only involves two participants: exchange investors and fund companies, while collective subscription also involves exchange and Chinese settlement companies, which is more complicated to operate."
Reference to mature overseas experience
In fact, many years ago, the exchange conducted research and discussion on ETF collective subscription. A research report titled "Analysis and Reference of the Operational Status of Taiwan ETF Fund TTT" released by the Shanghai Stock Exchange Research Center in 2004 mentioned the collective subscription model.
This research report states that as Taiwan’s first ETF fund, the operating status of the Bora Taiwan Excellence 50 Fund (TTT for short) has always been the focus of the industry. Bora Taiwan Excellence 50 Fund (TTT) was officially listed on June 30, 2003. The design and operation of TTT was jointly completed by Taiwan’s Bora Securities in cooperation with Daofu Group and with the cooperation of the Taiwan Stock Exchange. The ETF uses the Taiwan 50 Index as the tracking target, and the net value per unit is one percent of the index.
According to phased data analysis, from June 30 to July 25, the market redeemed 23 base units (without a physical subscription), and the total number of TTT units was reduced to 80% of the initial scale. This is mainly because the participating securities companies held too high bargaining chips during the issuance stage, and some units were redeemed in order to reduce market risks. However, with the bull market in the Taiwan stock market in the second half of 2003, the "Guoan Fund" and the four major funds 4 and other private institutions converted their holdings in large quantities (about NT$20 billion NT$6) through collective subscription, resulting in the rapid growth of the scale of TTT funds. As of December 24, 2003, the scale of the TTT fund reached 847 million units (847 bases), with a net value of NT$45.61 per unit, and the total net assets of the fund were approximately NT$38.637 billion.
collection physical subscription refers to the basket stocks required for subscription through the same participating securities firm under prior negotiation agreement. The amount of fund unit allocated by each party to the collective subscription method. It is divided based on the amount calculated based on the closing price of the day calculated by each of the stock combinations mentioned by each of the total amount of cash submitted. The collective subscription method needs to be formulated. One of the parties is responsible for the payment of the cash part and the acceptance of the subscription. When dividing the fund units according to the investment ratio, it may appear less than one thousand "zero shares".
solves the problem of how individual institutional investors can gather stocks through collective subscription. Taiwan's "Guoan Fund" uses this method to cooperate with the four major funds and other private institutions, and converting the stocks it holds is the best example.
It is worth noting that the Hong Kong government directly converts the Hang Seng shares in its hands into cash through the "continuous issuance mechanism", which is completely a "cash-out" behavior. Taiwan’s “Guoan Fund” subscribes to TTT through the primary market, converts the stocks they hold into TTT fund units with higher liquidity, but may not be sold immediately in the market.
In the view of an ETF fund manager, the ETF collective subscription mechanism launched in China in the future is roughly consistent with the ETF collective subscription principles in the Taiwan market in China. However, the Bora Taiwan Excellence 50 Fund mentioned in the article is just an ideal situation, that is, a few investors can collect a lot of stocks. In reality, there may be only a few investors who use a small number of stocks for collective subscription, and the fund manager still needs to help them adjust the portfolio and integrate it into the fund's holdings.
"Overseas ETFs have always had a collective subscription mechanism, but overseas is a securities registration and settlement model. Collective purchases are the investors who use their securities companies to adjust their positions and then subscribe to ETF funds; while in China, the central registration and settlement model, the exchange investors adopt direct subscription of ETF funds, and the fund company then adjusts the portfolio of the holdings of this part of the assets." An ETF fund manager analyzed that compared with the overseas securities registration and settlement model, the central registration and settlement model implemented in China is safer, avoiding the risk of securities companies misappropriating customer assets. The advantage of the overseas model is that its business is more flexible.
Innovation further promotes the growth of ETFs
All parties in the market are also looking forward to this innovative business.
"At present, in addition to several leading ETFs, there are many ETFs not large in scale in the ETF market. The industry also hopes to have an innovative mechanism to promote the growth of ETFs." said the person from the above-mentioned fund company.
An industry insider believes that the exchange of ETFs during the issuance period no longer allows "exceeding the index weight". In the future, some investors who may have the need for ETFs to be replaced can consider the collective subscription method, and the collective subscription will not affect the interests of the original ETF holders. However, the current market demand for collective subscription is difficult to judge.
"We are still full of expectations for the innovation of ETF business. At present, many investors in the market have this demand. In the future, opening up should improve the liquidity of ETFs and expand the scale of related products." According to an industry insider.
Some industry insiders also believe that collective subscription has added a choice for investors who need to exchange shares, but no market research has been conducted so that market demand cannot be judged. Previously, the exchange also mentioned that compared with investors who directly bid for the stocks they hold in the secondary market to sell or transfer large quantities, ETF stock subscription smooths the impact on stock prices and is more conducive to the stability of the secondary market.
However, some industry insiders also mentioned that compared with a basket of stock subscription, collective subscription is a fund company to adjust the holding portfolio. In this process, for those who exchange, the buying and selling cost is not certain. Therefore, it is impossible to judge how much the market demand for collective subscription is. Other fund companies also hope to observe the launch of the first batch of ETF collective subscription pilots in the future, and then consider market demand and system transformation costs before judging whether to participate.
and fund company personnel said that it is now necessary to promote the development of equity funds, including active and passive equity funds. The industry is also looking for ways to promote the development of equity funds. ETF collective subscription is only one of the measures to be promoted.
