Tian Xuan believes that a pilot of “T+0” can be first tested among individual investors and then transitioned to institutional investors when it is mature; start with a single “T+0” transaction per day and gradually transition to multiple “T+0” transactions per day until it is fully covered.
Recently, “Caijing” magazine learned that during the National Two Sessions in 2024, National People’s Congress representative and Vice Dean of Tsinghua University’s Wudaokou School of Finance, Tian Xuan, will present several suggestions. Among them, the suggestion about piloting the gradual restoration of the “T+0” stock trading system has attracted widespread attention.
Tian Xuan believes that from the perspective of the trading system, China’s current “T+1” trading system can no longer meet the needs of building a healthy investment ecology under the context of the full registration system. Implementing a more flexible and fair trading system will be an important focus to enhance investors’ sense of gain in the short term and achieve a dynamic balance between market financing and investment.
The “T+1” trading system is the system practiced in China’s A-share market, while most of the major international stock markets adopt the “T+0” trading system. In recent years, as the A-share market continues to develop and system innovation deepens, debates over the “T+1” trading system have never ceased.
Tian Xuan stated that the “T+1” trading system violates market fairness. Under the current “T+1” trading system, when there is significant volatility in the stock market on a particular day, large institutional investors can use stock index futures, ETF arbitrage, and margin trading for hedging strategies to compensate their losses or even profit, whereas small and medium investors cannot recover their same-day losses if they make a wrong move. This not only contradicts the principle of market fairness but also could have an adverse impact on the stability of the financial market. Moreover, under the restrictions of the “T+1” trading system, investors, worried about investment risks, may exhibit trading rigidity with similar positions, which could exacerbate the liquidity crisis of the market, especially for small and medium-cap stocks.
In addition, Tian Xuan believes there is a mismatch between the stock market trading system and the stock index futures market trading system.
“Since the Chinese stock index futures market operates under the ‘T+0′ trading system, where futures bought on the same day can be sold on the same day and both long and short trades can be made, large institutional investors can hedge trades simultaneously in both the stock and futures markets. However, due to the high threshold of the futures market, small and medium investors find it difficult to enter the futures market, and can only hope for unilateral long trading in the stock market. In such a situation, if institutional investors engage in short selling in the futures market and the stock price drops, stock market traders will not be able to stop loss in time. Therefore, the mismatch between the stock and stock index futures market trading systems increases investors’ market risk and is not conducive to the stable and healthy development of the market’s investment capabilities,” Tian Xuan said.
He also stated that the “T+1” trading system is not conducive to stimulating the activity of the stock market and reduces stock liquidity, “As investors cannot sell the stocks purchased on the same day, their funds are locked in whether the stocks are profitable or not on that day. At the same time, the already occupied purchase funds will have a significant opportunity cost. The reduced efficiency of capital use will add to the psychological burden on investors, especially when the stock market is sluggish, investors may buy fewer stocks for fear of not being able to profit or even losing on that day. Potential stock investors may also be deterred from the stock market due to the fear of excessive daily volatility and substantial losses. In the long run, this will affect the liquidity of the entire market.”
In response, Tian Xuan offers the following suggestions:
First is to gradually pilot the resumption of the “T+0” stock trading system. Starting with blue-chip stocks on the main board market and gradually expanding the scope of the “T+0” trading system, transitioning from a single day, single transaction to multiple transactions in a single day, and from individual investors to institutional investors, until it is fully covered. Taking the Shanghai Stock Exchange’s research on the single transaction “T+0” trading system as the starting point, we should progressively and orderly promote the “T+0” trading system from the main board market to other market segments, with the ultimate goal of achieving full coverage in the A-share market, and gradually standardize the fluctuation limits for each market segment.
Second is to introduce supporting risk management measures to prevent significant market volatility. Adopt a margin system, conduct regular assessments of investors’ accounts, and restrict accounts with a history of bad transactions as risk management measures to prevent the risks that may arise from the “T+0” system, in order to maintain market stability.
Third is to apply more precise investor suitability management. When setting investor access thresholds, differentiate investors based on asset size and investment experience, managing accounts separately, implementing a special pricing system, and limiting the frequency or scale of “T+0” trades to prevent investment risks.
Fourth is to strictly implement the “Securities Law,” and improve the rule-based regulation of securities trading. Improve the construction of market monitoring and early warning systems for transactional oversight, and promptly detect abnormal transactions. Establish the mechanisms for accountability and penalties following the issuance of securities and strictly enforce them. Strengthen the coordination mechanisms between different departments, and severely punish illegal activities such as financial fraud and insider trading, in order to enhance the severity of penalties. Progress further revisions of the “Criminal Law,” hold personal liabilities accountable, increase the maximum length of sentences, and substantially elevate the cost of security violations and crimes.
Fifth is to focus on the supervision of information disclosure, to further enhance market transaction transparency. Expand the auditing scope of information disclosure, and progressively promote differentiated information disclosure according to the subject matter through effective regulation, continual monitoring, category-specific regulation, and technology-based oversight. Build a legal sanction mechanism that complements civil, administrative, and criminal laws, increase the intensity of penalties for regulatory and legal infractions, hold intermediary institutions to their responsibilities, urge intermediaries to strictly conduct verifications and professional due diligence, and encourage listed companies to operate normatively, disclose truthfully, and improve the quality of information disclosure by listed companies.
Exciting video↓↓↓
Today’s topic: How do you think we should improve the stock trading system? Feel free to share your thoughts in the comments section.
Past articles
I take each “view” you click on as a mark of like.
