What does margin trading mean?

Margin margin trading refers to the behavior of investors providing collateral to securities companies qualified for margin trading and borrowing funds to buy securities (margin transactions) or borrowing securities and selling them (securities lending transactions) . It includes financing and securities lending by securities firms to investors and financing and securities lending by financial institutions to securities firms.

The essence of margin trading is to increase trading funds for investors and amplify investors’ profits. In fact, it is the same as third-party financing.

Financing and securities lending are actually two forms. Financing refers to using your own stocks as collateral to borrow money from securities companies to buy stocks;

If you borrow money to buy stocks, If the stock price rises, the profit will be used to repay the funds borrowed from securities companies and the interest, and the rest is your own profit; securities lending refers to using the principal as collateral, borrowing stocks from securities companies, and then selling the stocks. When a stock falls, buy back an equal amount of the same type of stock at a low price. ?Extended information

Margin margin lending means that customers provide collateral, and securities companies lend funds to them for buying listed securities or lending listed securities for them to sell, and the customers repay the borrowed funds within the agreed period or Securities and securities trading activities with interest and fees. The most important impact of margin trading and securities lending business on the capital market is the realization of leverage trading and short-selling mechanisms. It has a long history in Western countries.

Stock pledge financing is a way to use stocks and other securities to provide pledge guarantee to obtain financing funds.

It can be seen from the definitions of the two that the connection between margin trading and stock pledge financing is that both are financing methods and require certain collateral. In most cases, both Both use stocks as pledges, and at the same time, both will have a significant impact on the capital flow of the securities market.

In the past, when the securities market was still immature, some people even made no distinction between "financing" in margin trading and stock pledge financing and used them interchangeably. With the standardization of the national stock pledge financing and margin trading systems, the market has gradually made a clear distinction between these two concepts.

Baidu Encyclopedia-Margin and Securities Lending