How Does The Margin Trading Work?

The China Securities Regulatory Commission announced that it will start the pilot work of margin trading and margin trading of securities companies in the near future. Margin trading, as a mature trading system widely implemented in the overseas securities market, is an important foundation for the basic functions of the securities market to play its role.

Margin trading includes securities financing, margin trading and financial institutions' financing and securities lending to brokerages.

Usually, the term "margin trading" refers to the business activities of a securities company lending funds to clients to buy securities listed on the market, or to lend out listed securities for sale, and to collect collateral.

Securities trading arising from margin trading is known as margin trading. Margin trading is called credit paction because of the loan relationship between securities companies and customers.

Margin trading can be divided into two types: financing paction and margin trading. Customers borrow money from securities companies to buy securities and call for financing pactions, and customers borrow securities from securities companies to sell securities.

In short, financing is to borrow money to buy securities. Securities are investors who sell securities under the condition of anticipation that a certain price of securities will fall.

In the margin trading, investors need to submit applications for margin trading to securities companies, open accounts after verification, and deposit a certain percentage of margin with securities companies with funds or securities own assets to finance securities companies and sell them to securities companies.

Unlike the general stock exchange, investors can not repay funds and securities on time and in full. Securities companies can force their positions to be liquidated. The funds available for closing positions are first used to repay debts owed by customers, and the remaining funds are credited to the clients' credit capital accounts.