What’s new: The minimum ratio of funds that brokerages and other participants in stock-related activities must set aside in their cash settlement accounts will be cut to an average of around 13% from 16% starting from October, China Securities Depository and Clearing Corp. Ltd. (CSDC) announced Thursday.
The move is aimed at improving the efficiency of funds used in the market, according to the CSDC, which is overseen by the China Securities Regulatory Commission and is a settlement services provider for securities.
Industry sources said 30 billion yuan ($4.2 billion) to 40 billion yuan of funds may be unleashed into the market as a result.
The cut to the ratio is also intended to support the implementation of the “Delivery versus Payment” (DvP) reform, according to the CSDC announcement. DvP is a common method of securities settlement that can ensure the transfer of securities only takes place after payment is completed.
The background: The minimum ratio of settlement reserve funds for stock-related business was lowered from 20% to 18% in December 2019, and from 18% to 16% in April 2022.
Last year’s cut was in response to top policymakers’ call to stabilize capital markets and support economic growth, and was aimed at lowering the costs of capital and serving the real economy, the CSDC said in an announcement at the time.
Contact reporter Zhang Yukun (yukunzhang@caixin.com) and editor Nerys Avery (nerysavery@caixin.com)
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