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M Stanley: China Tightens Cross-border TRS as Risk Management Measure, Limited Impact on Leading Brokers
2026-06-25 11:40:08 Morgan Stanley said in a report, citing a Securities Times article dated June 24, that some Chinese private equity funds have been informed by their brokerages that new cross-border total return swap (TRS) business will be suspended. This year, as assets under management (AUM) of domestic private equity funds have surged, demand for southbound TRS has grown rapidly to gain exposure to overseas AI and leading tech stocks. M Stanley believes part of the reason for suspending new business may be heightened volatility in overseas equity markets, prompting the China Securities Regulatory Commission to manage the associated risk exposure. M Stanley noted that the move may also aim to curb non-compliant activities, such as certain private equity funds using specific structures to help investors circumvent qualified investor requirements. The action appears to be a counter-cyclical adjustment implemented through window guidance, rather than a fundamental shift in TRS regulation. The broker added that although derivatives business has recently been one of the drivers of return on equity (ROE) growth for leading securities firms, it believes the marginal impact of the suspension should be limited. This is because regulators have imposed caps on the overall scale of brokerages' derivatives businesses since early 2024. Following a strong rebound in 2025 and so far this year, M Stanley believes most leading brokers are already approaching their quota limits. With the overall quota cap unchanged, brokers may reallocate capacity to other derivatives products, such as northbound TRS, benefiting from rising demand for A-share "hard tech" leaders. M Stanley expects the appeal to strengthen further as more high-quality "hard tech" companies conduct initial public offerings (IPO) on the A-share market. (ad/da)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |