1. Definition:
-Refinancing: Refinancing means that investors lend their securities to brokers, and brokers lend these securities to other investors in order to obtain certain interest income. In the refinancing transaction, investors still hold the ownership of securities, but lend them to brokers, who then lend them to other investors at higher interest rates, thus realizing income.
-Margin trading: Margin trading refers to investors borrowing money from brokers to buy securities (margin trading), or lending their own securities to brokers, who then lend these securities to other investors (margin trading). Margin trading includes not only the behavior of investors borrowing money to buy securities, but also the behavior of lending securities to brokers to obtain interest.
2. Operation object:
-Refinancing: The participants in refinancing include investors who hold securities, brokers and investors who borrow securities. Investors who hold securities lend their securities to brokers through refinancing, and brokers lend these securities to other investors who need to borrow securities.
-Margin trading: participants in margin trading mainly include investors who borrow money to buy securities and investors who borrow securities. Investors who borrow money to buy securities invest in securities through margin financing and securities lending, while investors who borrow securities borrow securities held by others through margin financing and securities lending for trading.
3. Purpose:
-Refinancing: The main purpose of refinancing is to enable investors holding securities to obtain certain interest income. At the same time, investors who provide securities lending services can also borrow the required securities for trading to meet the needs of investment strategies.
-Margin financing and securities lending: The main purpose of margin financing and securities lending is to increase investors' trading funds, so that they can invest in securities on a larger scale or realize leverage. Investors who borrow money to buy securities can get extra funds to invest through margin financing and securities lending, while investors who borrow securities can borrow securities held by others through margin financing and securities lending to trade, thus obtaining the profit of the difference.
4. Risks and benefits:
-Refinancing: The risk of refinancing mainly lies in the credit risk that the lent securities may face, that is, the securities broker can't return the lent securities on time, and investors can't get interest income. The income mainly comes from the interest income obtained from lending securities.
-Margin financing and securities lending: The risks of margin financing and securities lending mainly include market risk and credit risk. Market risk refers to the possibility that the price of securities purchased by borrowing may fall, resulting in the loss of investor's loan principal. Credit risk refers to the failure of securities companies to return borrowed securities on time, or the failure of investors who borrow securities to return securities companies on time.