China Fund Daily reporter Liu Ming
In the era of ETFs that are soaring and advancing, various brokerages are struggling to move forward.
In the past five years, the number, scale and number of holders of stock ETF products have increased several times, much higher than the growth rate of funds and stocks as a whole. The number of stock ETF products has increased from 98 to 610, an increase of more than 5 times; the scale of assets has increased from 196.1 billion yuan to 1.08 trillion yuan, an increase of more than 4 times; the number of holders has increased from 630,000 to 12.6 million , an increase of 19 times.
In addition to product sales and trading, ETFs are also associated with securities companies’ wealth management, custody, financing, market making, derivatives and many other businesses. Therefore, the expansion of ETF business is increasingly valued by major securities companies, and some small and medium-sized securities companies will ETF serves as a starting point for differentiated competition.
A reporter from China Fund News learned that in recent years, major brokerages have promoted and expanded ETF business through various forms, and some brokerages have vigorously carried out system construction to improve operational efficiency. In terms of assessment, brokerages have also shifted from re-launching to paying more attention to inventory.
Brokers take multiple measures to increase stock holdings
Many interviewees said that in recent years, the enthusiasm of securities companies to develop ETF business has increased significantly.
Zhang Jianhui, general manager of the Financial Products Research Center of China National Finance Securities, said that brokerages are increasing the holdings of ETFs and other funds through their own methods. Liu Mingjun, Chief Wealth Officer and General Manager of the Wealth Management Department of Huajin Securities, also said that many brokerages are stepping up the promotion of ETFs, including strengthening ETF investment education and publicity in the APP, and promoting them through various forms such as graphics and live broadcasts. There are also various ETF competitions launched continuously, and the allocation of ETFs for customers is strengthened in the investment advisory assessment.
The most direct promotion is to set up an ETF area in the trading APP. Many brokerages have set up relevant columns in prominent positions in the APP and continue to optimize and improve. For example, as a leading brokerage with active ETF transactions, Huatai Securities has set up an ETF area in a prominent position on the first-level column of its own APP, and displays carefully selected and popular sector ETFs in the front row, which is helpful for investors to understand and participate. CITIC Securities also displays the ETF area in a prominent position on the head. The Ping An Securities APP also displays the ETF area in the first-level column, and recently displays the ETF competition in a flash. Huajin Securities, which takes ETF as its development feature, has set up an ETF zone at the top column.
The ETF Firm Offer Contest has also become an important means for more and more brokerages to strengthen their ETF business. For example, Huabao Securities, in the ETF transaction data released by the Shenzhen Stock Exchange, in March 2023, the brokerage’s ETF turnover ranked second, second only to Huatai Securities, and ahead of Guotai Junan, Dongfang Fortune, Dongfang Securities, CITIC Securities and other large companies. Brokers, and Huabao Securities did not enter the top ten ETF turnover in the Shenzhen Stock Exchange in January. It is worth noting that, from February to April this year, Huabao Securities held the first quarter Smart Investment Cup ETF Firm Offer Competition.
In recent years, major brokerages have joined forces with major fund companies to hold ETF firm offer competitions. According to incomplete statistics from China Fund News, China Merchants Securities, Guosen Securities, Ping An Securities, Orient Fortune Securities, Donghai Securities, Huaxi Securities, etc. have all cooperated with fund companies to hold ETF real offer competitions, and encourage investors to participate by giving gifts and other ways. Popularize ETF knowledge and enhance investors’ asset allocation capabilities.
Under the guidance of the supervision of stock holdings, many brokerages also pay more attention to stock holdings in terms of assessment. Liu Mingjun said that Huajin Securities has identified ETFs as a feature in the direction of wealth management, and has vigorously tilted towards ETFs in assessment. Even if the short-term profit is not obvious, it will strengthen the assessment and incentives for the company’s wealth management ETFs to maintain the direction, and continue to strengthen ETFs for investment advisors. Professional configuration and service ability training have achieved good results. A number of leading brokerage wealth management and fund company related people also said that in recent years, many brokerages have shifted from the original focus on initial issuance to now paying more attention to the assessment of holdings.
According to reports, as of the end of the first quarter of this year, Huajin Securities’ equity ETF sales have increased by more than 10 times. Among them, equity ETFs accounted for more than 30% of the company’s total sales of financial products, and the holding scale accounted for more than 20% of the company’s total financial products. The above data industries are usually below 5%. The number of customers of the company participating in ETF transactions and the purchase amount of investors on the market have both increased several times.
ETF trading and operating systems are also important as infrastructure. According to market participants, the current user experience of Huatai Securities’ refinancing matching system and Huabao Securities’ conditional order system is very good.
According to the relevant business person in charge of Huatai Securities Investment Advisory Development Department, Huatai Securities continues to hold special customer activities such as “ETF lecture hall” and “ETF strategy meeting” to provide professional services and companionship. Benefiting from the rapid development of the entire ETF market and the gradual improvement of the operating ecology, the number of Huatai Securities ETF customers, transaction scale and retention scale have continued to grow in recent years, and customers’ awareness and utilization of ETF products have steadily increased.
Focusing on the characteristics of ETF products such as clear themes, convenient transactions, and low costs, Huatai Securities continues to carry out ETF allocation concept promotion and investment education activities, and widely promotes and popularizes ETF allocation concepts through live broadcasts, short videos, and special events.
Regarding the ETF business of securities companies, Liang Xing said that there are several aspects: First, since last year, China Foundation Association has included ETF holdings in the regular disclosure data, which has directly increased the enthusiasm of securities companies; second, more and more stock customers are now turning to ETF investment. Third, the growth rate of ETFs in recent years has been significantly faster than the overall growth rate of public funds.
Zhang Jianhui also said that the ETF business is a business ecology. For securities companies, it is not only consignment sales, but also conducive to the development of PB custody, margin financing and securities lending, market making, derivatives and other business development of securities companies, especially for securities companies to obtain financing. The coupon source of the coupon business.
Exchanges and fund companies also attach great importance to ETF business, holding various ETF forums and online and offline activities. Since the beginning of this year, the Shanghai Stock Exchange and fund companies have held the “Nineteen Years and Nineteen Cities” ETF Summit Forum, and the Shenzhen Stock Exchange has continued to organize fund companies to enter the top 100 business departments to promote ETFs.
ETF Linkage Brokers Multiple Businesses
ETF is associated with multiple business lines and departments of securities companies, providing securities companies with multiple sources of income and promoting business development.
The person in charge of the relevant business of Huatai Securities Investment Advisory Development Department said that compared with active partial stock fund products, ETF trading attributes are stronger and investment strategies are more abundant. ETF underlying stocks and index derivatives together constitute the ETF investment and trading ecosystem, which can be effectively connected Wealth Management and Institutional Business. As a differentiated business for securities companies, ETF provides efficient asset allocation tools for securities companies’ wealth management on the one hand, and on the other hand, it cooperates with a series of institutional brokerage businesses such as market making, custody, financing, and derivatives to generate more diversified income.
A person from a leading brokerage firm in South China also said that, first of all, for wealth management or brokerage business, ETF consignment sales can generate financial product consignment income; while customers participate in ETF transactions, which bring transaction commissions to brokerages like buying and selling stocks. Subscription and redemption need to be converted into a basket of stocks, which in turn forms stock transactions and commissions; for investment advisory service customers, ETF is an important target for asset allocation to customers.
Secondly, for ETF-related margin financing and securities lending business, many ETFs are the subject of margin financing and securities lending, and brokerage clients can participate in relevant margin financing and securities lending investments; more importantly, as ETFs are an important source of refinancing of stock and securities sources, securities companies You can “borrow securities” from fund companies through refinancing.
From the perspective of securities companies carrying out fund custody, many securities companies intervene in the field of fund custody through ETFs. The person in charge of the trusteeship department of a securities company said that compared with private equity securities products and non-standard products with a small single product scale, public fund products are all standardized products, and the single product scale is relatively large, which is a very good variety for custody , better economic benefits.
There are also brokers who enter into ETF cooperation through the settlement system. For example, in March this year, Ping An Securities’ public offering ETF bond system was officially launched, supporting single-market ETFs, cross-market ETFs, cross-border ETFs, currency ETFs, etc. The product provides professional transaction settlement services. At present, Ping An Securities has joined hands with China Asset Management Co., Ltd. to complete the transaction of the first ETF swap bond product. Ping An Securities said that through the optimization and upgrading of the ETF bond model, it can promote in-depth cooperation with top fund companies and broaden the company’s product line.
In addition, derivatives such as market making and options are also very important ETF-related businesses. Many brokerages make markets for ETFs, and the varieties of ETF options are becoming more and more abundant.
There is a lot of room for the development of brokerage-related businesses
In recent years, the development speed of stock ETFs has obviously exceeded the growth rate of public funds as a whole or partial equity funds, and also exceeded the development speed of the stock market. As an exchange-traded fund product, ETF is also suitable for stock investors to transform into fund investors, and there is still a lot of room for development in the future.
According to Wind data, the total asset size of public offering funds at the end of 2017 was 11.55 trillion yuan, and by the end of 2022 the total size was 25.75 trillion yuan, an increase of 123%; the total size of stock + hybrid funds increased from 2.74 trillion yuan to 7.03 trillion yuan , an increase of 157%. At the end of 2017, the total market value of A-shares was 56.71 trillion yuan, and at the end of 2022 it was 79 trillion yuan, an increase of 39%.
In the past five years, the number, scale and number of holders of stock ETF products have increased several times, much higher than the growth rate of funds and stocks as a whole. The number of products increased from 98 to 610, an increase of more than 5 times; the scale of assets increased from 196.1 billion yuan to 1.08 trillion yuan, an increase of more than 4 times; the number of holders increased from 630,000 to 12.6 million, an increase of 19 times, investors run into the market.
The person in charge of the relevant business of Huatai Securities Investment Advisory Development Department said that in recent years, with the gradual enrichment of ETF categories and the in-depth development of investor education, the scope of investment advisory allocation targets for customers has become wider and wider, and the market’s awareness of ETF products has continued to increase. promote. The introduction of index derivatives such as ETF options has made the ETF ecology more and more perfect, which is conducive to enriching asset allocation strategies and improving risk management capabilities, thereby attracting more investors to participate.
The growth of ETF scale will naturally benefit most directly from the wealth management business of securities firms, whether it is product agency sales income or investment advisory services for asset allocation for customers. In the context of “depositing trust with sales”, more and more ETFs are hosted by brokers, which also reflects the status of brokers in ETF sales to a certain extent.
According to statistics, among the 31 stock ETFs that have been established this year, as many as 15 are managed by securities companies, accounting for nearly half. . This has opened a big gap in the traditional bank-based fund custody market.
The substantial increase in the size of ETFs can provide the securities market with more securities sources for securities lending. For many brokerages, this may be more important than agency commissions. In the context of the current scarcity of securities sources, having more securities sources is an important resource for securities companies to attract customers, and these important customers will bring more income contributions to securities companies.
Looking forward to the future, ETFs with low cost and high transaction efficiency that track the index still have a very broad space. According to the statistics of the person in charge of financial products of a large brokerage in South China, the ETF scale/stock market value of A-shares will exceed 2% by the end of 2022; from the perspective of overseas situations, the US ETF has continued to maintain a rapid development momentum since its emergence, and the US ETF scale is about 65,000 In terms of the number of customers, the number of ETF holders by the end of 2022 will be 12.6 million, while the number of shareholders in my country exceeds 200 million. The ETF market in my country still has great potential for development.
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