What is a Dealbreaker?

The so-called underground credit transaction refers to the misappropriation of investors 'stocks or funds by securities staff members for private gain and the unauthorized use of investors' stocks and funds by securities dealers to provide other investors with financing and margin trading.

Underground credit transactions

Right!

The so-called underground credit transaction refers to the misappropriation of investors 'stocks or funds by securities staff members for private gain and the unauthorized use of investors' stocks and funds by securities dealers to provide other investors with financing and margin trading.

Investors may experience such a strange phenomenon when they trade securities: when they fill in the order, they are told that there is not enough funds in the capital account or when they fill in the order, they are told that there are not enough shares in the stock account. In a word, the transaction cannot be completed. Therefore, it can be said that investors' stocks or funds used for securities trading are not safe and are often "borrowed" to "lay eggs." Some may return it, others will never return.

This behavior is an infringement of the interests of other investors, and it may cause investors to lose investment opportunities and even lose all their investments. Therefore, the word "underground" is used, one is illegal and the other is aliasing.

Chinese name

Underground credit transactions

The difference between underground credit transactions and credit transactions

Credit transactions are also called margin transactions, short-selling and short-selling transactions, margin trading and margin trading. Regulated credit transactions refer to transactions in which investors borrow money from securities dealers to buy or sell securities when they have insufficient funds or securities and need to buy or sell securities. It is a trading method commonly used by countries around the world. The basic principle of credit trading is to use borrowed funds or securities to trade according to the trend of price changes, and to obtain the difference before and after the price change. This kind of credit transaction is called margin selling transaction, also known as margin trading, and also called short selling transaction, loan stock transaction, short transaction and so on.

Underground credit transactions infinitely amplify the speculative principle of credit transactions. It is an illegal credit transaction and a deceptive credit transaction. The reason why the law prohibits underground credit transactions can be seen from the differences between underground credit transactions and regulated credit transactions:

1. Underground credit transactions are margin transactions without margin

Judging from the conditions for realizing borrowing, in a standardized credit transaction, whether it is financing or margin trading, investors must pay a certain amount of security to the securities dealer before getting advances from the securities dealer. In some countries, this margin accounts for a large proportion of the funds required for the entire transaction. Once the stock price trend that is opposite to the investors who borrow or borrow securities is expected, the securities firm can avoid or minimize the loss to a certain extent by virtue of the controlled margin. Moreover, in a short-sale transaction, when a securities firm borrows funds from a bank for a customer, it must give the stock as a guarantee for the loan to the bank.

In a short sale transaction, when a securities brokerage sells securities to clients, it is necessary to send a certain amount of money to a special loan stock market as a guarantee for the loan stock. These measures have ensured the security of credit transactions to a certain extent and reduced their risk. In underground credit transactions, if it is the staff of the brokerage firm who buys and sells short, the actor secretly removes the funds or securities of the brokerage firm or other customers on the condition that it is his job, and of course, no security deposit is required. If it is a customer's underground credit transaction, the guarantee is often a form of walking, and even some securities companies do not have any guarantee requirements for the so-called large and reputable investment investors. Once the stock price trend that is contrary to expectations occurs, it will continue to be in arrears through the continuous embezzlement of the East Wall and the West Wall, and eventually it will not be returned, or the client and the securities company will shirk their responsibilities, leading to disputes and even intensification of conflicts. From these results, underground credit trading is a kind of margin trading without margin.

2. Underground credit transactions are credit transactions without credit

From the perspective of the subject, in a standardized credit transaction, a securities firm lends funds or securities to investors, and lenders and users are separated from each other, each enjoying different rights and bearing different obligations. At the very least, the broker knows who the funds or securities have been lent to. In underground credit transactions, if it is the staff of the brokerage firm that uses their positions, they secretly "loan" funds or securities to themselves, and the nominal lender (coupon) is combined with the actual user (coupon) It is impossible to talk about the respective rights and obligations of the lender (coupon) and the user (coupon). Therefore, the underground credit transaction of a securities company can also be called self-financing or self-financing, which is a very unfair so-called credit transaction. If it is a mixed underground credit transaction, once the shortfall occurs, there will often be disputes between the customer and the securities company due to the confusion of rights and obligations, and even stealing will occur. In this sense, underground credit transactions are credit transactions that do not speak of credit.

3. Underground credit transactions are an inducement for disputes or further crimes

From the perspective of the source of funds or securities, in the standard credit transaction, the funds lent by securities firms to investors come from bank loans, and the securities lent to investors belong to third parties.

In securities trading, when the price of the security does not fall but rises, if the owner of the lent securities requests to sell, the short seller must return it immediately, so that the original owner does not miss the trading opportunity. In some countries, there are specialized securities and financial companies that provide securities dealers with funds and stocks needed for credit transactions. In underground credit transactions, regardless of whether the customer is short-selling or the securities company staff is short-selling or short-selling, the borrowed funds or securities belong to the securities company or other customers. Moreover, clients who have misappropriated their securities have no idea that their resources have been used by brokers to provide financing, securities lending or speculation on their own, and they do not know who to ask for immediate return. As a result, even if the original owner has recovered the securities after many setbacks, it will inevitably delay the transaction timing. Moreover, the underground credit transaction itself contains a hidden danger: because there is no legal and stable source of borrowing and debit securities, once the price of the securities does not match the expectations of the trader, the bullish price will fall or the bearish price will rise, either for itself or for the customer. The staff of a securities company that is short-selling or short-selling may further misappropriate funds or securities on the accounts of other customers to make up for the previous shortfall caused by wrong judgment. This makes the nature of underground credit transactions a vicious circle.

4. Underground credit trading is a disruptor of stability

A standardized credit transaction has an advantage. It can curb the ups and downs of the stock price to a certain extent and act as a price stabilizer.

Because in standardized credit transactions, the source of margin financing and short selling is not from local sources, but by specialized financial institutions. In this way, short selling when the stock price is too high is actually injecting more securities into the market from the outside of the securities market in exchange for the situation of oversupply in the stock market, and the stock price will fall, at least not continue to rise excessively. In the same way, when the stock price plummeted, the short-selling was actually injecting funds into the market from the outside of the securities market in exchange for a situation of oversupply, which objectively caused the stock price to rise, at least not to fall excessively. In underground trading, because the source of financing and margin trading is actually from local sources, the funds and securities of other investors who have not been involved in the channel are turned back and forth, and no new resources have been injected from the outside of the securities market. To the role of the stabilizer, it must be a destroyer of stability. In other words, standardized credit transactions can become a tool for the government to regulate, guide the securities market, and prevent excessive speculation. Underground credit transactions are also a kind of regulation, but the regulator is not the government, but people who only care about themselves.

5.Underground credit transactions are free loans

In a standard credit transaction, investors must pay the interest of the loaned funds or stocks to the securities dealers, whether they are loans or loans. Therefore, securities companies can obtain a not too small gain by financing and margin trading. In underground credit transactions, because the securities company's own staff also secretly joined them, it is impossible for these special short sellers and short sellers to pay the company's used funds or securities interest. As a result, underground credit traders and funds There is a clear injustice between the legal owners of securities.

6.Underground credit transactions are secret transactions that cannot be monitored

In standardized credit transactions, indicators such as credit transaction balances and the ratio of credit transactions to market transactions are public and can be calculated. If the government or the stock exchange believes that excessive or overheated credit transactions have occurred, they can be controlled through measures such as adjusting the margin ratio, suspending credit transactions, and strictly stipulating the conditions for allowing credit traders. And if the customer or the staff of the securities firm engages in underground short selling and short selling, the market will lose real-time monitoring of the actual scale of credit transactions and the degree of speculation. This is undoubtedly harmful to the regulation of macroeconomic development.

In summary, the six differences between standardizing credit transactions and underground credit transactions describe both the characteristics of underground credit transactions and the social harm of underground credit transactions. Therefore, serious underground credit transactions should be treated as criminal offences.