What is the impact on all parties in the market?, The number of "100+1" shares available for purchase in A-shares | Fund | A-shares
Recently, the Shanghai and Shenzhen Stock Exchanges proposed to optimize the "trading end" system. Among them, the study adjusted the subscription quantity of stocks and funds on the Shanghai Main Board and Shenzhen Stock Exchange to "100+1", attracting investor attention.
According to the announcement of the Shanghai and Shenzhen Stock Exchanges, the study allows the number of securities declared on the main board of the Shanghai Stock Exchange, listed stocks on the Shenzhen Stock Exchange, and funds to be adjusted from multiples of 100 shares to a minimum of 100 shares, increasing by 1 share.
"That is to say, there is still a minimum trading threshold of 100 shares for trading mainboard stocks, but unlike previous bulk orders, optimized investors can apply for 101 shares, 102 shares, 156 shares, etc. Investors still cannot submit purchase orders for less than 100 shares, such as 1 or 2 shares," said a market insider.
In the early stages of the development of the securities market, in order to facilitate trading matching processing, it was usually stipulated that order declarations should be made in whole hands, that is, one hand or its integer multiples. But with the rapid development and efficiency improvement of automated electronic trading, as well as the continuous improvement of trading mechanisms, the necessity of whole transaction is gradually weakening, and reducing the minimum trading unit has become a common trend in overseas markets.
When the Science and Technology Innovation Board was established, the requirement of integer multiples of 100 shares was also lifted. The number of declared shares above 200 can be increased by 1 share, such as 201 shares, 260 shares, etc.
According to SEC statistics, the proportion of zero share trading volume in the US stock market reached about 19% in June 2022, with over 39% of the top 10% stocks having zero share trading volume.
Yang Delong, Chief Economist of Qianhai Open Source Fund, stated that allowing the main board to increase by more than 100 shares per share can facilitate investor trading, improve market activity and liquidity. On the one hand, it can lower the trading threshold, allowing investors to participate in stock investments with lower total prices, especially for high priced stocks, and increase market activity. On the other hand, through zero share declaration, investors can buy more high-quality companies with fixed total assets, making their investment portfolio more diversified and playing a role in risk diversification.
In addition, when calculating the number of constituent shares required for ETF redemption based on index weights, there may be situations where the required number of constituent shares includes zero shares. Due to the fact that the minimum trading unit for stocks on the Shanghai Main Board and Shenzhen Stock Exchange is 100 shares, the constituent stocks of ETF redemption need to be calculated and rounded, which differs from the actual number of stocks calculated based on index weights.
"Allowing zero share declarations will facilitate the management of index funds and be helpful in reducing tracking errors," said Li Xunlei, Chief Economist of Zhongtai Securities. Previously, due to rounding rules, the subscription and redemption list did not match the index weight or the actual portfolio of the fund. In cases where the number of subscriptions and redemptions was large, it would change the actual portfolio weight distribution of the fund, causing deviation from the index weight and resulting in tracking errors. In order to reduce the impact of portfolio deviation, fund managers need to adjust their portfolios in a timely manner, resulting in certain transaction costs.
He also stated that another impact of the rounded list is that the reference net value calculated based on the real-time prices of the listed stocks during trading may deviate from the actual net value of the fund. Investors in subscription and redemption are unable to accurately determine the impact of weight deviation on each stock, resulting in uncertainty in arbitrage trading, which is reflected in the discount and premium levels of secondary market prices.
According to a research report released by Great Wall Securities, the institutional optimization of the "trading end" of the Shanghai and Shenzhen Stock Exchanges continues the spirit and policy tone of the July Politburo meeting. The adjustment of the number of securities declarations has enhanced the convenience of trading and the smoothness of funds, improved the efficiency of fund utilization, and effectively stimulated market vitality. Especially for individual investors, investment convenience has significantly improved. For fund managers, it is beneficial to reduce investment costs and investment management difficulties. For some high priced stocks, the difficulty and cost of purchasing can be effectively reduced. For securities firms, the securities brokerage business with a higher proportion of brokerage business is expected to continue to benefit.
Another major measure to optimize the trading system is to study the introduction of post market fixed price trading mechanisms in ETFs. After market fixed price trading refers to the trading method in which investors buy and sell stocks at the closing price through closing price commission after the bidding trading is completed.
Dong Dengxin, Director of the Institute of Financial Securities at Wuhan University of Science and Technology, stated that the introduction of a fixed price trading mechanism in ETFs after market hours can help improve investor trading convenience and market liquidity. The introduction of post market fixed price trading provides ETFs with an additional half hour of fixed price trading time, making it convenient for investors who do not want to continue trading or bear the risk of price fluctuations to engage in post market trading. It also allows investors who want to engage in ETF bulk trading but have complex processes to conduct centralized trading after market hours, increasing the convenience of trading channels.
"At the same time, the participation of large ETF orders in post market fixed price trading can effectively reduce the impact of large orders on the bidding market and help increase market stability," Dong Dengxin said.
