Off-site options supervision and then upgrade!
On the morning of April 16, the futures affiliate received regulatory requirements - from the 17th onwards, it will cease to cooperate with private equity funds to make over-the-counter options.
A number of futures subsidiaries confirmed to the China Securities Journal reporter that they received the phone. The regulatory authorities require the futures subsidiary to temporarily suspend the private equity fund as the counterparty to the off-exchange derivatives business of the risk management subsidiary. It will not be able to add new business, and the surviving business will not be extended. Both private equity fund company and private equity fund products are not allowed to participate.
On the evening of April 10, a number of securities companies received relevant regulatory requirements. From April 11 onwards, securities companies and private equity funds were suspended from OTC options. Securities companies must not increase the scale of their businesses, and their stock business expires automatically. No renewal is allowed. period.
The channels for private equity funds to participate in over-the-counter options are currently suspended and the over-the-counter options business has been fully reorganized.
China Securities Journal reporter also learned from close to the regulator that the off-site options supervision policy will be on the ground during the year! Brokers participate in the bargaining or promotion of OTC stock options; formalized trading of OTC options will open.
Private equity funds are greatly affected
According to industry insiders, as supervision becomes more stringent, private equity funds' participation in off-exchange options will basically be blocked.
Another personage in the industry stated that the suspension of private equity funds' participation in over-the-counter options can regulate market behavior and help the healthy development of the market.
China Securities Journal reporter learned that a lot of private equity has been involved in individual stock options in recent days. On April 10, after regulators required brokers to stop cooperating with private equity funds in the new OBB option business, some private equity investors hoped to continue their business through the subsidiary of Futures. After the supervision of the futures subsidiary company kept pace, the private equity fund's over-the-counter option business was suspended.
The aforementioned industry insiders stated that the stoppage was for regulation. After the specification, OTC options will develop more healthily.
According to the data from the China Securities Industry Association, as of the end of December 2017, the initial nominal principal amount of unsold OTC options was 223.971 billion yuan. According to the nominal principal statistics, in the new OTC options transaction in December 2017, the ratio of futures companies and subsidiaries was 12.14%, commercial banks accounted for 23.94%, and private equity funds accounted for 18.76%. According to the number of contracts, the number of futures companies and their subsidiaries accounted for 15.79% of the new OTC options in December, second only to 40.09% of private equity funds.
It can be seen that private equity funds are very active in OTC trading!
China Securities Journal reporter recently made several reports on off-exchange options.
On April 2, when the China Securities Journal published an article revealing that private equity funds were involved in over-the-counter options, they became the “seller” in violation of regulations and broke through the chaos of investors’ regulatory requirements. After April 2, related regulatory requirements followed.
It is understood that at present, some private equity funds and agents have cooperated to break through the method of managing the appropriateness of investors for over-the-counter options, so that investors who have no risk tolerance ability can be involved in this business. Some private equity funds cooperate with the Internet platform: brokers or futures subsidiaries to attract private equity funds, return some of the royalties to private equity funds; private equity funds in order to cooperate with the Internet platform, return part of the royalties to the Internet platform; Internet platform in order to attract agents, Return some of the royalties to the agents. After layered distribution, the threshold for the participation of some OTC stock options has dropped to 500 yuan (China Securities News reported on April 2).
The Internet platform often contains misleading propaganda when it comes to introducing products, over-emphasizing the "leverage attributes, the potential gains of OTC stock options are unlimited." In addition, some private equity funds take the brokerage channel and started the seller. This broke through regulatory requirements - the seller of off-exchange options must be a brokerage firm and a futures subsidiary.
It can be seen that the recent supervision pays close attention to off-exchange options:
At the end of March, with respect to supervision, the use of futures assets covered by OTC options was suspended for the record. The regulation of off-exchange options business is becoming increasingly strict. According to another understanding, brokerage firms have also identified more stringent qualifications for qualified investors in the launch of OTC options, especially for private equity products. In September 2017, supervision stopped the individual from participating in the OTC stock option through the futures subsidiary; and the counterparty who had always requested the OTC option must be the agency.
On April 10, brokerage firms conveniently received regulatory requirements and suspended their private equity funds in cooperation with the newly opened option stock options.
On April 14, the Securities Regulatory Commission issued a risk warning on off-exchange options trading.
Limited impact on futures subsidiaries
Zhou Bao, deputy general manager of Huatai Great Wall Capital Management Co., Ltd. of Huatai Futures Subsidiary, said in an interview with a China Securities Journal reporter that on the morning of April 16, he had received regulatory guidance on the window and requested the futures subsidiary to stop private placement on the 17th. Open the foreign option. Different futures company risk management subsidiaries focus on different aspects of business - some focus on serving the real economy, while others focus on services such as private equity. At present, most of the futures subsidiaries are based on the commodity market and are mainly based on serving the real economy. Therefore, this requirement may have limited impact on such futures subsidiaries.
Zhou Bo said that this requirement is to follow the aforementioned requirements of the securities industry association in order to prevent regulatory arbitrage.
Tips: How private equity funds participate in over-the-counter options
Taking stock options as an example, the seller of OTC options must be a broker or futures subsidiary with qualifications for OTC individual stock options. Private equity funds are buyers. Take put options for individual stocks as an example. Private equity funds can buy put options for certain stocks. The strike price is set at 10 yuan. If the stock price becomes 5 yuan in the future, private equity earns 5 yuan per share, after deducting the premium, What follows is the income from private equity funds. If the price of the stock is higher than RMB 10 in the future, private equity funds will waive their exercise rights and lose their premium.
Private equity funds use off-exchange options for two purposes: first, hedging positions. If a private equity position contains a stock, buying a put option can hedge the risk of the stock. Second, leverage the leverage that comes with options to win high returns.
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