AI Financial Knowledge Base on Uncle Xiang's Notebook

Trading Around the Close: A-Share After-Hours Fixed-Price Trading, MOC, and CAS

Tue, 14 Jul 2026 00:00:00 +0800

A piece of news on July 1st about the expansion of after-hours fixed-price trading in the Shanghai and Shenzhen markets brought an old question back to the trading desk: does the sudden volume that appears after the close actually count as “after-hours trading”? If you compare it with the MOC (Market on Close) in U.S. equities or the CAS (Closing Auction Session) in Hong Kong, the answer is: they all organize liquidity around the closing price, but each sits at a different stage of price formation.

The key issue here is not the extra half-hour of trading time, but rather that more orders can bring the execution results closer to the official closing price. The closing price serves not only as the endpoint of the daily candlestick, but also as a common public benchmark used for index calculation, fund valuation, and performance comparison. For accounts that need to track a benchmark, an intraday “seemingly cheaper” fill cannot necessarily substitute for a fill that aligns with the benchmark.

First, Break Down the Three “Closing” Concepts

In market discussions, people often collectively refer to various transactions around the close as “closing trades.” They should be categorized into at least three types:

Mechanism	Whether the closing price is formed here	Typical Use
Closing pricing or closing auction	Yes	Aggregates orders to form the official closing benchmark
Post-close pricing trades at the established closing price	No	Continues matching at the already-formed closing price
Extended trading session	No, prices can still change	Continues quoting and trading after the close

The first category addresses “what is today’s official closing price.” The second category addresses “the price has been set, and who else is willing to trade at this price.” The third category comes close to what is commonly referred to as extended post-market trading: participants continue to trade, and transaction prices may deviate from the official closing price.

Therefore, MOC is not synonymous with after-hours trading in U.S. stocks, nor is CAS a single order. The after-hours fixed-price trading currently being discussed for A-shares refers to price-matching that occurs after the closing price has been formed. What all three have in common is the closing benchmark as their objective, though they occupy different positions within the institutional framework.

Public reports indicate that the Shanghai and Shenzhen markets plan to expand the scope of after-hours fixed-price trading from the stocks listed on the STAR Market and the ChiNext to all A-shares and ETFs in the Shanghai and Shenzhen markets; the reported order matching period is 15:05—15:30, with the closing price of the day used as the transaction price, and orders are matched continuously on a price-time priority basis. Since the materials available for this round are media paraphrases, the actual implementation date, scope of securities, and the timing for order acceptance and cancellation should be subject to the rules and notices of the exchanges in effect at the time.

The business implications of this mechanism are straightforward: the closing price has already been determined, and if both buyers and sellers accept that price, they can continue queuing for matching. It does not rediscover the price nor produce a second closing price. Price risk is compressed into the question of “whether to accept today’s closing price,” but execution risk still remains—an effective order does not guarantee a counterparty. In other words, what it locks in is the price, not the quantity or liquidity.

It is also necessary to avoid conflating the closing mechanisms of the Shanghai and Shenzhen markets into a single concept. The Shenzhen market has a closing call auction arrangement, while the official closing price of the Shanghai market is calculated according to its own rules. Regardless of how the respective closing prices are formed, post-close fixed-price trading occurs after the official closing price has already been determined.

ETFs are the part of this expansion most prone to misreading. After-hours fixed-price trading handles secondary-market buying and selling of ETFs, and does not directly process ETF creation and redemption; creations and redemptions still follow the fund contract and applicable business rules. It may give ETF management, market making, and accounts that use ETFs or their constituents for rebalancing an additional secondary-market execution window, making trade prices more likely to align closely with the closing benchmark used for valuation or tracking.

U.S. Stock MOC: Accepting the Final Price in the Closing Auction

MOC can be understood as a “closing order executed at the final closing price.” It sends the order into the closing auction: at the time of placing the order, the final price is not yet known; it expresses a willingness to accept the official closing price ultimately formed by the auction, rather than issuing an ordinary market order after the close.

This distinction matters. Post-close trading at a fixed price is based on a known, fixed closing price; MOC, on the other hand, is based on the final closing price that is yet to be determined through auction. The former is primarily responsible for matching after the closing price has been formed, while the latter brings orders into the closing price formation process. MOC also does not guarantee unconditional execution—order cutoff times, cancellation restrictions, imbalance information, and executable conditions all vary by trading venue rules. One should not interpret “U.S. MOC” as a single, identical rule across the entire market.

Why is there such demand in the closing window? Index funds, ETFs, and accounts benchmarked against the official closing price tend to care more about the consistency between execution price and the benchmark. On event days such as index rebalancing or portfolio rebalancing, this demand may be more concentrated. However, from a single MOC order or a surge in volume near the close, one cannot directly infer that a certain type of capital is necessarily bullish or bearish.

HK Stock CAS: Not an Order, but a Closing Auction Session

CAS is the Closing Auction Session for Hong Kong stocks. It is not an order name equivalent to MOC, but rather a set of procedures for organizing the closing price determination: it brings together buy and sell intentions during the closing phase around elements such as the reference price, allowed price range, order input, matching, and random closing. Random closing means that participants cannot precisely predict the exact ending moment.

In terms of hierarchy, MOC is a type of order participating in the closing auction, while CAS refers to the entire set of sessions and procedures that host the closing auction. A-share post-session fixed-price trading, on the other hand, is matched at the official closing price after it has been formed. The eligible securities, phase divisions, and price restrictions of CAS must be subject to the rules in effect on the HKEX on that day; one cannot assume that a stock listed in Hong Kong will necessarily have the same CAS liquidity.

Scale: Unify the Definition First, Then Comparison Becomes Meaningful

There is no single natural, unified answer to “how much trading is related to the close.” Some count notional value traded in the last few minutes of the full session, some count the closing auction; some include ETFs while others only count stocks; and still others put the closing auction, after-hours fixed-price trading, and extended trading sessions under the same denominator. Even when all are labeled “share of closing-session trading,” differences in date, market scope, currency, and trade definition mean they cannot be compared directly side by side.

This round did not obtain the latest official scale data from all three venues on the same date and under the same statistical caliber, so the rumored shares or amounts have not been written up as conclusions. What can be confirmed is the structural significance: these mechanisms provide different paths for orders that need to be close to the closing benchmark; on specific days such as index rebalancings, the related flow may be significantly amplified. As for which venue is “larger” and what share of the full day it accounts for, the statistical caliber must first be aligned.

Seeing Huge Volume at the Close, First Ask Five Questions

Did the trade occur before, during, or after the formation of the official closing price?
Are the orders accepting the final closing price, or still expressing a new limit-price judgment?
Are there any known benchmark execution demands on that day, such as index adjustments or ETF rebalancing?
Is there a more direct explanation, such as order imbalance, corporate information, or market events?
Does the data cover stocks, ETFs, or a specific trading session?

The closing price attracts transactions not because it inherently carries stronger directional signals, but because it is the most public and most easily comparable price. MOC, CAS, and A-share post-session fixed-price trading are all different tools for organizing liquidity around this benchmark: MOC participates in the closing auction, CAS organizes the closing auction procedure, while A-share post-session fixed-price trading continues to match orders after the price is formed. Understanding this division of labor is more reliable than directly translating late-session volume expansion into a bullish or bearish judgment. This article only serves as an explanation of trading mechanisms and does not constitute any trading advice.

References

“Important Adjustments! Starting Tomorrow, A-Share Trading Rules Will Change”, Beijing Daily citing China Fund Journal, reposted by Sohu, 2026-07-05: https://www.sohu.com/a/1045971173_163278
“Closing Without Wrapping Up? What Exactly Does the New A-Share Trading Rule Say?”, The Paper, 2026-06-10: https://www.thepaper.cn/newsDetail_forward_33342443

写作附记

Original Prompt

$blog-writer The A-share market has recently expanded its post-close trading, the U.S. stock market has MOC (Market on Close), and the Hong Kong stock market has CAS (Closing Auction Session). Please explain this business in detail, including its background, scale, and business implications.

Illegal Cross-border Exhibition Rectification (Part III): Re-evaluating Online Securities Broker Valuation

Fri, 22 May 2026 20:32:00 +0800

For a platform, what is most damaging from regulatory crackdowns on illegal cross-border activities is not the stock price for one or two days, but the potential reassessment of its entire historical growth model. Fines are one account; whether the retained domestic customer base can continue to contribute transactions, financing, assets, and conversions is another, much longer-term concern.

The greatest strength of internet brokers like Futu and Tiger is their ability to make Hong Kong and US stock trading a low-friction product. The problem is that when this experience faces mainland users, it encounters barriers related to licensing, foreign exchange regulations, suitability assessment for investors, data handling, and the boundaries of cross-border financial services.

Therefore, the third section should focus only on the business model and institutional stratification. Although the product capability of cross-border securities firms remains strong, if regulatory boundaries re-enclose the largest and most readily available user base, its valuation can no longer be predicated on old growth stories.

Internet Brokers are the Most Complete Sample

From a regulatory perspective, Futu, Tiger, and Changqiao share one common characteristic: they possess complete online pipelines, standardized business models, and highly digitized customer acquisition and trading processes. The advantage of this model is rapid growth; however, its drawback is that it leaves an equally comprehensive compliance footprint.

If we break down an illegal cross-border exhibition link, it is roughly:

Content and advertising reach to domestic users
Guiding app download or access to the account opening page
Completing account registration remotely
Handling transactions through offshore accounts
Establishing complementary channels for fund inflows and outflows
Continuous maintenance of stickiness through customer service, community, and investment education content

Online brokerage firms have almost standardized all six steps into core products. From a regulatory perspective, such subjects are the easiest to categorize, the most straightforward to document evidence against, and thus also the most effective in establishing an industry precedent (or deterrent effect).

Therefore, naming online brokerage firms initially should not be interpreted as meaning that only they are problematic; the more reasonable understanding is that they represent a sample chain that regulators can fully dissect/analyze.

Not Mentioned Does Not Mean Being in the Safe Zone

Regarding this point, the China Securities Regulatory Commission’s (CSRC) Q&A with journalists on February 15, 2023, stated it very clearly: In accordance with the principle of implementing unified supervision for similar types of businesses, the CSRC at that time had “deployed and initiated standardized rectification work for illegal cross-border expansion by offshore subsidiaries of mainland securities companies.”

This statement is crucial. It indicates at least three things.

First, the regulatory logic has never been one where “internet brokers operate under one set of standards, and Chinese domestic brokers operate under another.” Second, what started at the end of 2022 was not merely an isolated case involving Futu or Tiger, but rather a larger unified rectification framework. Third, different levels of public exposure do not equate to different regulatory requirements.

Therefore, I disagree with the view that “only these three companies are going to suffer; the others can get away with it.” But I also don’t agree with the statement “everyone is compromised,” which outright dismisses everything. This judgment is too crude and fails to help differentiate true risk exposure.

A more accurate way to put it is: Different institutions have different ways of being exposed to risks, and the pressure for rectification will also be layered.

More useful than hitting with a single stick by looking at layers

Considering only public definitions and business models, they can generally be divided into three levels/layers.

Segmentation	Typical Characteristics	Pressure Intensity
High-Risk Exposure	Clearly targeting Mainland retail investors for online solicitation, account opening, trading, community operation, and content deployment	Highest
Medium-Risk Exposure	Mainly serving existing clients; public client acquisition efforts are weaker, but historical business chains remain	Second Highest
Low-Risk or Compliant Channels	Serving through licensed, certified, and quota-restricted channels such as Stock Connect (HK), QDII, Cross-border Wealth Management Channels, etc.	Relatively Controllable

The third layer here is the easiest to confuse. Many people conflate the legitimate channels for investing in Hong Kong and US stocks with overseas institutions that do not hold domestic licenses but directly offer services to Mainland residents. In reality, this boundary is precisely what this current round of rectification aims to demarcate.

The legal cross-border investment channels themselves have not been fundamentally negated. What has been addressed/rectified are the segments of the process that circumvent domestic licensing, bypass market entry approvals, and skirt both capital and operational boundaries.

Next, pay closer attention to the implementation details

If we continue to follow the current trend established by open policies, I am more inclined to see several types of actions emerging successively.

The first type involves brokerage firms implementing self-imposed regional isolation. For example, the account opening page, account opening link, distribution channels, customer service talking points/scripts, community content, and identification of the source of the account opening link will more strictly differentiate between domestic (mainland) and non-domestic users.

Category two involves segmenting trading permissions for existing accounts. The most common approaches include setting up sell-only functionality, or handling permissions separately based on different markets, products, and currencies.

Category Three: Funding channels are continuously tightening. Even if the securities firm’s front-end announcement hasn’t been fully released, banks, payment services, currency exchange, and deposit/withdrawal pipelines may tighten first. Often, what truly hinders user experience is not the trading button itself, but the difficulty in getting funds deposited.

Category Four: The asset transfer arrangements are gradually becoming clearer. This area currently has the least public information available, but it is the most worth monitoring. This is because it determines whether clients can only liquidate their assets, or if they have the opportunity to transfer and absorb them through compliant structures.

Regarding Category V, the penalty document will clarify and standardize the guidelines. Specifically, how exactly “all illegal gains” are calculated, what period they track back to, and which entities are covered. The currently published guidelines for this portion are incomplete; only the release of a formal penalty document later on will serve as the true valuation anchor point.

It won’t stop at just three names

My personal judgment is that this will not stop at simply “publicly naming three companies.”

The reason is simple. The joint plan of eight departments aims to regulate a type of activity, not the brand names of three companies. As long as the business model remains within the same value chain, it is unlikely that it can operate outside the framework for a long time, even if subsequent penalties, levels of public disclosure, or intensity of rectification vary.

The three things that make a difference might be:

What is the magnitude of the historical stock size?
To what extent have internationalization and reducing dependency on mainland been achieved over the past two years?
Did institutions preemptively implement regional isolation and inventory pressure reduction?

Therefore, when looking at this matter going forward, it’s not simply about guessing “who else will be named,” but rather whose business structure is better equipped to withstand this round of boundary redrawing.

Convergence of Series

If you read the three articles together, the connection is actually very clear:

In 2022, the focus was on restricting new additions. The CSI Stock Connect event provided a clear transition period of nearly one year. This time on May 22, 2026, the scope has upgraded to existing holdings only selling and not buying, and it has begun publicly treating internet brokerage firms as typical samples.

If I have to make the shortest assessment, I would say:

This is not a sudden reversal, but rather a regulatory trend that started several years ago and has reached the stage where existing businesses must also be included in the disposal/resolution scope.

Of course, there will also be implementation rules, company responses, formal penalty documents, and asset handover arrangements later on. However, in terms of the general direction, this grey cross-border retail channel will continue to be compressed, leaving virtually no doubt. What truly remains to be waited for is the speed, scope, and cost at which it will be compressed.

References

[CSRC Promotes Remedial Work on Illegal Cross-Border

Author’s Notes

Original Prompt

Breaking news in Hong Kong and US stock trading today: Institutions like Tiger Securities were severely disciplined for illegal cross-border operations, and Futu and Tiger dropped 40% pre-market. Let's first review the previous CSRC investigation action, which completely locked down account opening for mainland users, but existing clients were unaffected. This time, it is the existing clients who face trading bans. Last year or the year before, there was a ban on HK stockbrokers serving mainland clients regarding transactions through Shanghai Stock Connect (read: "Search related policies to confirm how long the gap is between policy implementation and brokerage enforcement in banning mainland users from buying"). Today's news said there was a two-year period for users to clear their positions, but it didn't specify when the buy ban would take effect. It also did not clarify for how long illegal profits would be retroactively charged. Even if Futu published an announcement, as of the end of Q1 2026, the proportion of mainland Chinese clients with assets to the total group assets has dropped to 13%. Meanwhile, under the group

This rewrite retains the original manuscript's regulatory pathway, institutional stratification, and follow-up observation points. However, it has narrowed the scope of the third section's commitment to focusing on "how the platform growth model is re-evaluated." It avoids expanding further on account operation details to prevent repetition with the second section.

Illegal Cross-Border Exhibition Rectification (II): The Two-Year Window Most Easily Misinterpreted

Fri, 22 May 2026 20:31:00 +0800

After regulatory news breaks, what ordinary users are most concerned about is not the brokerage firm’s stock price, but whether they can still operate their own accounts: whether they can buy, sell, withdraw funds, or transfer positions. The phrase that is easiest to misunderstand here is “the two-year focused cleanup period.”

If only new account openings are restricted, the perceived experience of existing users will not change immediately. However, if current transactions are further restricted, users will encounter entirely different issues. The mildest approach might be a sell-only mandate; the most restrictive could require fund transfers, capital withdrawals, or the revocation of certain trading permissions.

This piece only discusses the user side. What truly needs preparation is not speculating whether regulations will loosen, but rather separating and analyzing “the length of historical buffers granted” from “what these public statements currently require.”

That time with the Shanghai Stock Connect program really took almost a year

Many people only recall “that later they couldn’t buy it,” but don’t remember how long the gap was. According to the public rules and exchange operational notices, it was roughly like this:

Date	Document/Action	Key Details
2022-06-24	HKEX Participant Announcement CT08822E	Established transitional arrangements for qualified existing investors due to mainland rule revisions.
2022-07-25	SFC Notice No. 200 Takes Effect	Clarified that Hong Kong securities firms’ mainland investors cannot buy or sell A-shares through the Stock Connect, but existing investors can continue to trade during the transition period.
2023-07-23	Last Day of Transition Period	The last day that existing investors could normally purchase shares.
2023-07-24	Formal Switch	Mainland investors can only sell and cannot actively buy; Futu Help Center also executes instructions based on this date.

If calculated based on the period from rule effectiveness to the front-end ban, the interval was from 2022-07-25 to 2023-07-24, which is approximately 364 days. Based on the period from the exchange announcement public disclosure to the front-end ban, that spans from 2022-06-24 to 2023-07-24, totaling 39

So, it wasn’t that there was no buffer at all; rather, they provided a buffer of nearly a year, and also clearly stated the final blackout date.

But we cannot directly apply a full year’s buffer this time

On the surface, this two-year intensive remediation period appears to be longer than the previous one. In reality, the scope of supervision and the ultimate goals for handling the two matters are not the same.

During the SSE Stock Connect policy change, what was essentially done was blocking “round-trip trading.” Mainland investors should not have been buying A-shares by circumventing the system through Hong Kong brokerage firms. Therefore, after the rule revisions, they provided a clear transition period before finally switching to “selling only and no buying,” which is quite simplistic in its logic.

The rectification effort in 2026 is more complex. It targets the entire illegal cross-border operating chain for securities, futures, and funds, not merely a single trading interface. The public scope simultaneously covers:

Illegal Solicitation
Illegal Account Opening
Illegal Entrusted Trading
Illegal Promotion and Traffic Generation
Cooperation in Cross-border Fund Transfer

Issue one is complex, and the execution might not be able to provide a nationally unified, front-end standardized, and text-copy consistent “buying ban starting at 00:00 on Month X Day X,” as last time.

Furthermore, this time specific institutions have been named, and it also simultaneously mentions “proposed confiscation of all illegal gains and severe penalties according to law.” This suggests that it is not merely institutional optimization but also carries a distinct regulatory enforcement aspect. The pace of these enforcement actions often depends on various factors such as cautioning individual companies, rectification plans, system upgrades, customer notifications, and fund acceptance arrangements, and therefore cannot be summarized by a simple timeline.

Therefore, the Shanghai Stock Connect case can only serve as a reference: there may be processing time for both systems and clients between the issuance of regulatory rules and front-end execution. However, it does not mean that we can assume there will certainly be another full year of normal investment/trading activity this time.

Two-year window, not two years of free buying

This is the most crucial point I want to remind you of. (Or, depending on context: This is a key point I would like to emphasize.)

In the plan from the eight departments and the CSRC’s answers to media inquiries, the main official stance publicly given is: during the concentrated rectification period, accepting buy orders from existing investors is prohibited; only selling held securities and transferring funds out are permitted. In other words, according to public policy disclosures, “two years” describes a window for clearing existing business volumes/positions, not an allowance for continued free trading.

Why do many people misunderstand?

Because everyone naturally recalls the time of the Shanghai Stock Connect initiative: “Since they gave [us] a year before, it suggests that this time might also drag on for a long period; the front end won’t necessarily move quickly.” This deduction is not entirely unreasonable, but it can only be considered an inference, not a fact.

The more stable order of understanding is:

The public regulatory stance has shifted to “sell only, no buying.”
We must wait for announcements from each respective brokerage firm regarding the exact date of full implementation on their apps.
Before the official announcement, we cannot assume the opposite—that buying can continue normally/for a long time by default.

The order of these three sentences cannot be reversed. For users, the most dangerous thing is not selling early or late, but misinterpreting the regulatory cleansing window as a trading grace period.

What’s most valuable for investors is not guessing dates, but monitoring signals

If you are genuinely using this type of broker, the signals you should pay attention to most are the following public indicators. Do not treat community screenshots as final rules, nor should you extrapolate the buyable status from other people’s accounts onto your own account.

Signal	Why it is important	Reason more useful than rumors
Official announcements from brokerage firms	Determines when your account switches to sell-only mode	This is the most direct and effective document regarding your account.
Changes in deposit/withdrawal paths	Often precedes the full implementation of trading restrictions	Banking, payment, and foreign exchange channels will tighten up first.
Copywriting adjustments on the App, official website, and account opening pages	Reveals whether new customer acquisition and existing services are being separated	Closer to the execution level than second-hand interpretation.
Asset transfer/withdrawal arrangements	Determines if you can only sell, or if migration paths still exist	This is the core of subsequent loss control.

From historical experience, what truly impacts the account experience are often not the regulatory slogans themselves, but these execution details. At the user level, actions should focus on risk inventory concerning holdings, cash, transfer paths, and withdrawal paths, rather than interpreting this matter as a short-term trading opportunity.

My Conclusions

The Shanghai Stock Connect incident gave the market a clear benchmark: there was an approximate one-year gap between the rules taking effect and the actual buy restriction, with a very specific final date.

However, we cannot mechanically apply [this] time. The reason is not that the regulation will be gentler; quite the opposite. It is because its scope of rectification is broader, its enforcement nature is stronger, and the involved chain is longer. Therefore, “the public stance has already become stricter” and “the unified buy ban date for the front end has not been fully disclosed” will coexist simultaneously.

In other words:

Confirmed Fact: The current public regulatory requirement is no longer like the “retaining normal transactions” model from 2022.
Unconfirmed Fact: That all brokerage firms will cut off buying on the same day and using the same method.
Most Dangerous Misjudgment: Understanding the “two-year clearing period” as meaning you can still buy for two years like before.

Next time, we will broaden the scope to the platform side: why is it that merely mentioning internet brokerage firms like Futu and Tiger, as well as other Chinese listed brokerages, guarantees safety?

References

Several Provisions on the Connect Scheme for Equities between Mainland and Hong Kong Stock Markets (CSRC Order No. 200)
Hong Kong Exchanges and Clearing Limited Participant Notice CT08822E: Implementation Arrangements Regarding Restrictions on Mainland Investors Participating in Northbound Trades
Futu Help Center: Arrangements for Mainland Investors Participating in Shanghai-Shenzhen Stock Connect Trading
Eight Departments Jointly Issued ‘Work Plan for Special Action to Comprehensively Rectify Illegal Cross-border Securities, Futures, and Fund Operations’
[CSRC Spokesperson Answers Journalists on Special Actions to Comprehensively Rectify Illegal Cross-border Securities, Futures, and Fund Operations](https://www.csrc.gov.

Writing Notes

Original Prompt

Today's breaking news regarding Hong Kong and US stock trading involves illegal cross-border business activities, leading to serious investigations into institutions like Tiger Securities. Futu and Tiger stocks dropped 40% pre-market. Let's first review the last inspection action by the China Securities Regulatory Commission (CSRC). Last time, it completely restricted mainland users from opening accounts, but existing clients were unaffected. This time, transactions for existing clients are being prohibited. Back in last year or even two years ago, Hong Kong stockbrokers were banned from facilitating Mainland customers trading via Stock Connect. I searched for relevant policies and confirmed the time gap between policy implementation and brokerage execution: how long did it take before mainland users were prohibited from buying? Today's news says there is a two-year grace period for users to liquidate their holdings, but it doesn't specify when the ban on buying will begin, nor does it detail the lookback period for illegal gains. Even though Futu issued an announcement stating that as of the end of Q1 2026, the proportion of Mainland Chinese clients in terms of assets held accounted for only 13% of the group's total asset base, overseas client assets continue to climb due to the group's effective international strategy. The key metrics are not just client count, but also asset scale and transaction volume. The stock price is still falling; it hasn't recovered. There are many related events; I will structure a timeline and break them into a series of articles. This time, eight departments have intervened! They are comprehensively rectifying illegal cross-border operation of securities, futures, and fund businesses, naming Futu, Changqiao, and Tiger—typical internet brokerages. What about the other brokerage firms? How will they be

This rewrite retained the timeline and official terminology regarding the Shanghai stock deferral/extension process, but changed the central focus of the second article to "the two-year window must not be misunderstood." It does not provide specific operational recommendations, nor does it infer effective dates for any brokerage firm, thereby ensuring that regulatory facts are not written as trading instructions.

Illegal Cross-border Exhibition Rectification (Part 1): Redrawing the Boundaries of Existing Accounts

Fri, 22 May 2026 20:30:00 +0800

Investigations into Hong Kong and US stockbrokers caused initial price drops, with account issues only truly pressing upon users later. The most critical change this time is not the issuance of another regulatory statement, but rather the boundary shifting from “don’t allow new entrants” to focusing on “how existing players should exit.”

During the last inspection, many understood that domestic users could no longer arbitrarily open new accounts, but those who already had accounts could continue trading. This boundary provided both the platform and the users with a buffer zone, making the existing accounts appear as a gray but maintainable historical burden.

This set of articles should be split into three parts: The first article will only focus on regulatory boundaries, the second will cover how accounts can be operated/affected, and the third will discuss how platforms and other brokerage firms should re-price. We must clarify the boundaries first; otherwise, we risk mixing user operations, company valuations, and industry rectification all together.

2022 is for locking new additions, 2026 is for managing existing stock

Let’s unfold the timeline; many misjudgments come from conflating these two rounds of remediation into a single event.

Date	Public Action	Core Guidelines
2022-12-30	CSRC promotes rectification of illegal cross-border business expansion by Futu and Tiger Brokers	Effectively curb incremental growth, orderly resolve existing volume; stop new account openings, allow existing clients to continue trading.
2023-02-15	CSRC answers reporters, scope expanded to overseas subsidiaries of mainland securities firms	Unified supervision for similar businesses; will not arbitrarily restrict existing client trading.
2026-05-09	Eight departments jointly issue implementation plan	Comprehensive rectification of illegal cross-border securities, futures, and fund operations.
2026-05-22	Plan publicized, CSRC simultaneously answers reporters and names three institutions	Existing investors are only allowed to sell and transfer funds, prohibited from buying; concentrated rectification period is two years.

In 2022, the regulation was focused on turning off the faucet, preventing new water from coming in. For 2026, it is no longer only about restricting additions; rather, it involves starting to drain existing “old water.” The most essential difference between the two can be summarized in one sentence:

In 2022: Existing clients can continue to trade.
In 2026: Existing clients cannot buy any more; they can only sell their held securities and transfer the funds out.

This is why the market reaction was so significant. For internet brokerage firms, restricting new account openings harms the growth trajectory; while existing clients only selling rather than buying damages trading activity, retention rates, capital accumulation/settlement, margin trading and securities lending, and wealth management conversion. The former signals a slowdown in the growth narrative, and the latter implies a re-evaluation of the entire business model.

Many areas have been clarified, while those yet to be public are also extremely crucial

Regarding the external dimensions/opening diameter, quite a few parts have actually been clearly specified.

First, the object of regulation is not merely the app name, but the entire “illegal cross-border investment chain.” The plan from the eight departments states this very clearly, aiming to comprehensively rectify activities such as illegal solicitation, account opening, trading, fund transfer, and promotional traffic channeling. Furthermore, the CSRC (China Securities Regulatory Commission) defined the issue during a press briefing as a new type of illegal and non-compliant activity that is “more covert and poses greater danger.”

Secondly, the severity of the actions is heavier than in 2022. The CSRC’s public statement on May 22nd was escalated to “intended to confiscate all illegal gains of related entities of Tiger, Futu, and Changqiao both domestically and internationally, and severely penalize according to law.” Later that day, the own SEC disclosures from the two US-listed platforms pushed the market’s most concerned point—the “magnitude”—forward one step: Futu, according to its public statement, has proposed total fines and confiscations roughly at 1.85 billion RMB; while Tiger disclosed that the combined amount already fined and confiscated is approximately 411 million RMB.

Third, they gave a two-year concentrated rectification period. This “two years” is very important, but it cannot be simply understood as “everything remaining the same for two years.” The public statements suggest exactly the opposite; during the intensive rectification period, existing clients are required only to sell and not buy. The two years are more like a clearance window, not a free trading window.

What truly unsettles the market are the sections that have not been fully disclosed. These gaps cannot be filled by rumors, nor can they write out implementation dates for regulators.

Regarding the buy prohibition, when exactly will it take effect on the front-end systems of various firms? The public materials do not provide a unified and fixed date.
How was the total amount of RMB 1.85 billion related to Futu broken down? The public documents have not yet elaborated on how this is allocated among illegal gains, penalty multipliers, and the involved parties.
What is the subsequent plan for existing assets—will they be liquidated and exited, transferred to a compliant channel, or will the

These ambiguities will directly translate into valuation discounts. Because the worst-case assumptions are unknown, the market will initially calculate based on overly conservative standards.

The “13% Customer Count” Does Not Influence the Estimation

A statement from Futu in its response that has circulated widely is: “As of the end of Q1 2026, the proportion of asset clients in mainland China relative to the group’s total number of asset clients has dropped to 13%, while overseas asset clients continue to climb.”

This finding cannot be dismissed as useless, but it is nowhere near enough to calculate the potential impact on profit.

The problem is that it only gave the “percentage of customers,” but did not provide the two most critical items:

Proportion of Mainland Client Assets
Share of Transaction Volume or Commission Contribution from Mainland Clients

These two items are unavailable, so the 13% figure cannot be directly mapped to the profit impact. Online brokerages fear this kind of metric misalignment: fewer clients do not mean lower assets, nor does it mean weak trading activity. Especially long-term users often have larger capital, higher turnover rates, and stronger financing needs; the commercial value of a single account may not be low.

What can be seen in Futu’s recently disclosed financial reports is that the group’s overall metrics are still very strong. Both the 2025 annual financial report and the yearly report disclose that total client assets have reached HKD 1.23 trillion, 2025 revenue was HKD 22.8 billion, and funded accounts amounted to 3.365 million. This indicates that the company’s internationalization efforts over the past few years have genuinely taken off. However, this same set of public materials does not separately break down “the proportion of assets and transaction volume from mainland Chinese clients.”

Therefore, it is normal that the market is currently skeptical. It’s not a lack of belief in internationalization; rather, they are unsure what residual weight or potential mainland existing clients hold regarding asset and transaction activity dimensions. Client count is a headcount metric; valuation cares more about metrics related to assets, transactions, financing, and monetization.

This is not a typical negative factor for fines

Failing to recover quickly after a pre-market drop exceeding 40% was fundamentally due to the non-linear nature of this downward pressure/negative catalyst.

If it were merely fines in the tens of millions, the market would account for a one-time loss. However, the current public figures have been raised to approximately RMB 1.85 billion for Futu and RMB 411.2 million for Tiger, a magnitude that is clearly not a “small scratch.” If it were only about stopping new additions, the market would estimate slowing growth. But if the rule becomes “existing inventory only allowed to be sold, not bought,” what the market must re-evaluate is:

\[ \text{Future Valuation} \neq \text{Current Customer Count} \times \text{Simple Discount} \]

It’s more like a three-layer discount happening simultaneously:

Decline in transaction frequency
Account asset outflow
Rising compliance costs and uncertainty

To add another layer: whether we can still achieve incremental growth through the grey areas in the future; the current public narrative has essentially eliminated any room for speculation.

Therefore, this wave of stock price movement is not merely an emotional fluctuation; it seems more like regulators bringing a long-standing but unpriced risk onto the table all at once. The difficulty isn’t ‘how much they will fine,’ but rather how to monetize or convert the remaining existing assets/volume into revenue.

My Current Assessment

My judgment is straightforward: The round of enforcement on May 22, 2026, will not be a rerun of the old news from 2022, but rather an upgraded version of the previous cleanup effort. Furthermore, it has shifted from “forbidding continued expansion” to “requiring the shrinkage of existing capacity.”

For investors holding stocks such as Futu or Tiger, what they should pay attention to next is not community sentiment, but three types of public information:

Each brokerage firm’s own implementation announcement, especially the start date of buying restrictions
The calculation methodology/scope for “illegal gains” in penalty documents or subsequent formal decisions
Whether there are supporting measures such as asset transfer, account categorization, or regional isolation

This article first clarifies “what exactly distinguishes this time from the last time.” The next article will separately analyze the implementation window: referencing the period between policy implementation and when Hong Kong stock brokers truly prohibited buying on their front ends for mainland clients utilizing Stock Connect. While this reference point helps with understanding, it cannot be mechanically applied to this current rectification effort.

References

Notes on Writing

Original Prompts

Today's sudden news regarding HK/US stock trading involves illegal cross-border operations, with institutions like Tiger Securities being seriously investigated. Futu and Tiger fell 40% before market open. First, let's review the last regulatory investigation by the CSRC (China Securities Regulatory Commission). That time, it completely locked down new account openings for domestic users, but existing clients were unaffected. This time, however, trading for existing clients is being restricted.
Last year or the year before, Hong Kong stock brokers were banned from doing business with mainland clients transacting through Stock Connect. Searching for relevant policies and confirming how long there was an interval between policy implementation and broker enforcement: banning mainland users from buying? Today's news says there will be a two-year grace period to clear out holdings, but it doesn't specify when the ban on buying will begin. It also doesn't specify how long the illegal gains will be retroactively tracked. Even though Futu issued an announcement, as of the end of Q1 2026, the proportion of asset clients in Mainland China relative to the group's total asset client base has dropped to 13%. Meanwhile, under the group's effective internationalization strategy, the number of overseas asset clients continues to climb. Only customer numbers are available; asset size and trading volume percentage are the two critical factors missing. The stock price is still dropping; it hasn't rebounded. Many related incidents have occurred; compiling a timeline and splitting this into a series of articles. This time, eight departments are involved! They comprehensively rectified illegal cross-border operation of

This rewrite retains the original manuscript's timeline, official documents, and company disclosure narratives, but narrows the scope of the first article to "the difference between newly added restrictions and existing inventory disposal." The account execution window and other brokerage differentiations will no longer be covered in this piece; they are reserved for the following two articles.

The prior adjustment (pre-adjustment) for backtesting differs between domestic and international markets.

Wed, 22 Apr 2026 01:31:44 +0800

A few days ago, someone asked me using the pre-adjusted prices of very early Kweichow Moutai stock. Honestly, I was taken aback at first glance: Looking at the “pre-adjustment” values, Yahoo had no negative numbers, while East Money showed negative numbers. When I later reviewed my article from June, titled Detailed Explanation of ‘Adjustment’ and Data Acquisition in Backtesting, I realized that I had mixed up several things. At the time, I presented the “ratio method” as if it were the single standard, but pre-adjustment in the domestic A-share context and the commonly used adjusted close for Hong Kong/US stocks are fundamentally different metrics.

This article only does one thing: separate these two metrics/standards. I will put my judgment first so that you don’t get confused later: The pre-adjustment (or forward adjustment) of leading domestic apps is more like leveling the candlesticks by following the exchange’s ex-rights/ex-dividend reference price; the commonly used international adjusted close is more like using a cumulative multiplier to express the total return from “reinvesting dividends.” They are both called pre-adjustment, but they answer different questions.

A-Shares Pre-adjustment: How to Connect the Candlestick Data (The Core Issue)

With this domestic set of metrics, the public anchor points are actually not difficult to find. The SZSE has provided the reference price formula for ex-rights and ex-dividends:

$$ \text{Adjusted (Dividends/Rights) Reference Price}=\frac{(\text{Previous Closing Price}-\text{Cash Dividend})+\text{Rights Issue Price}\times\text{Share Change Ratio}}{1+\text{Share Change Ratio}} $$

The formula for “adjusted forward division” written in the East Money Encyclopedia and this approach are basically on the same track:

$$ P'=\frac{(P-D)+K\times r}{1+r} $$

Here, $P$ is the pre-adjusted price, $D$ is the cash dividend per share, $K$ is the rights issue or new stock price, and $r$ is the proportion of circulating shares change. The most important point about this formula is not whether it has division, but that the cash dividend is deducted based on a fixed amount.

Thus, if a company’s actions are limited to cash dividends—with no stock transfers or bonus share allocations—the formula will directly simplify to:

$$ P'=P-D $$

The consequence of this matter is very direct: for A-shares listed many years ago with high accumulated dividends, if the historical price is continuously extrapolated backward in time, it can indeed be calculated as a negative number. Occasionally, you might see such extremely early negative values on East Money (Dongfang Caifu). This does not necessarily mean that they have calculated it incorrectly; it is more likely that they are simply adhering to this common set of domestic pre-adjustment definitions.

I now prefer to understand it as an approach that prioritizes “graphical continuity.” If you open the software today, and the current price remains stable while projecting downward from previous K-lines, the chart connects smoothly, and the technical indicators look more natural. This is very useful for market analysis, but it does not naturally equal the total return series.

HK/US Stocks Adjusted Close, First, how to calculate the total return

Yahoo’s official definition of Adjusted close is very straightforward: It adjusts for both stock splits and dividends, and the dividend multiplier is calculated based on “the proportion of the dividend to the price.” Yahoo also explicitly states that one of the main purposes of doing this is to avoid negative historical prices.

If written as a formula, the common approach is to first assign a multiplier to each company’s action:

Stock split multiplier: e.g., 2-for-1, historical price times 0.5
Dividend multiplier: m=1-D/C_{t-1}

where $D$ is the cash dividend per share, and $C_{t-1}$ is the closing price before the ex-dividend date. Then, multiplying all subsequent corporate action multipliers sequentially yields the cumulative adjustment factor $F_t$:

$$ F_t=\prod_{j>t}(s_j\times m_j) $$

Therefore, the adjusted price is:

$$
P_t^{adj}=P_t\times F_t
$$

The meaning of this approach is very clear: It approximates what the total return would be if dividends were continuously reinvested back into this stock. Therefore, it is naturally better suited for calculating rates of return, long-term backtesting, and cross-period comparisons. This methodology is fundamentally different from the domestic approach that simply deducts cash dividends directly from historical prices; even though both might appear to adjust the candlestick charts, they are not the same at their core.

I'll take this opportunity to add that the old article from June implied that Yahoo / yfinance's adjusted data and Tushare's qfq are "completely the same thing," which is not strictly accurate. A more precise way to put it is: **they belong to the same family, both being multiplicative or factor-type adjustments, but the normalization anchor point may not be the same.**

## Adjustment Factors Are Not a Universal Translator

The core issue lies right here. Many people, upon seeing the phrase "adjustment factor," assume that all markets can be abstracted into a single set of factors and then simply apply `price * factor` without question. This assumption is largely valid within the common adjusted close systems used by Hong Kong and US stocks, but it may not hold true in China's pre-adjustment system.

The reason is not complex. This set of precise reweighting formulas used domestically in China is actually an affine transformation, not purely multiplicative:

$$
P'=\frac{1}{1+r}P+\frac{Kr-D}{1+r}
$$

In other words, it is essentially:

$$
P'=aP+b
$$

If a cash dividend occurs, the constant term $b$ will not be zero. When multiple corporate actions stack up, what you get is not a single cumulative multiplier, but a series of multiplications and additions of affine transformations. At this point, **a single "adjustment factor" is insufficient**; you need at least event information such as cash dividends, ex-rights prices/book values, share change ratios, or the equivalent $(A, B)$ parameters.

Therefore, the answer is quite clear: **the concept of the adjustment factor cannot be directly generalized within these two sets of schemes.**

- In the commonly used adjusted close system abroad, the adjustment factor is the core focus.
- In this precise adjustment system domestically, the factor can only cover percentage changes related to "stock splits / bonus issues"; once it encounters cash dividends, a single factor cannot accommodate them.

This is also why directly comparing pre-adjusted domestic software data with Yahoo adjusted close using the same metric often leads to increasingly confusing results.

## Where Does Tushare Really Stand?

The official documentation actually writes it very clearly. The formula provided in Tushare's A-share adjusted closing price data is:

$$
\text{Pre-adjusted Price} = \text{Daily Closing Price} \times \text{Daily Adjustment Factor} / \text{Latest Adjustment Factor}
$$

The same page also clearly stated two things:

- It dynamically reprices/reweights based on your specified `end_date`
- It uses a "dividend reinvestment" model

These two sentences are sufficient for qualitative description. **Tushare's A-share `qfq` is conceptually closer to the multiplier/factor type adjusted close found overseas, rather than East Money’s precise adjustment pre-adjustment method.** However, it retains its own normalization approach: it does not always anchor to today, but anchors to the `end_date` of your current query window.

So, the positioning for Tushare can be condensed into a single sentence:

- It does not use the same pre-revised definition as East Money Fortune.
- It is more similar to Yahoo, but the values may not be identical at every point.

Tushare later also added adjusted factors and adjusted data interfaces for HK stocks and US stocks, with the official description remaining `price * adj_factor = Adjusted Price`. This further illustrates its product design thinking: fundamentally, it is based on multiplicative factors.

## Back to Backtesting: First Define the Parameters, Then Discuss Accuracy

Once you understand this matter, many of the debates will actually disappear automatically.

If you want:

- Aligned with screenshots from domestic financial charting software
- Current price remains unchanged, historical K-lines are connected (or 'aligned flatly')
- Viewing the "pre-adjusted graph" in the context of A-shares

In that case, you should use the domestic set of standards for precise re-weighting/adjustment.

If you are looking for:

- Backtest Return Rate
- Total Return from Dividend Reinvestment
- Long-Term Strategy Evaluation

You should better use the multiplicative factor metrics/basis, such as Tushare's `qfq` or Yahoo's `Adjusted close`.

The biggest problem with that old piece from June wasn't that it was entirely incorrect, but rather that it merged two distinct sets of definitions into a single "definitive standard." Looking back now, what you should truly remember isn't that "proportional methods are always correct and addition/subtraction methods are always wrong," but rather: **Are you trying to fit the data visually, or are you calculating returns.** If these two questions aren't separated first, everything that follows—backtesting results, candlestick comparisons, even 'why negative numbers appear'—will all become hopelessly tangled together.

## References

- [ChatGPT Shared Dialogue: Adjusted Price Calculation Difference Analysis](https://chatgpt.com/share/69e653e4-2814-83ea-bd7d-4233343ca9cf)
- [Tushare: A-Share Adjusted Price Data](https://tushare.pro/document/2?doc_id=146)
- [Tushare: US Stock Adjusted Price Data](https://tushare.pro/document/2?doc_id=338)
- [Yahoo Help: What is the adjusted close?](https://help.yahoo.com/kb/SLN28256.html)
- [Shenzhen Stock Exchange: How to Calculate Adjusted (Ex-Dividend) Price?](https://investor.szse.cn/institute/video/

## Writing Notes

### Original Prompt

```text
$blog-writer analyze the content here: https://chatgpt.com/share/69e653e4-2814-83ea-bd7d-4233343ca9cf, and also historical articles 27 - where to find backtesting data? First, outline the common pre-adjustment calculation formula used in China, then outline the common pre-adjustment calculation formula used overseas. Regarding the concept of adjustment factor/reversion factor, can it be general for both schemes? What type of method does Tushare's data belong to?

Writing Approach Summary

Understanding spin-offs and splits in the US stock market can be challenging.

Wed, 13 Aug 2025 22:09:31 +0800

Prompt: As a Chinese person, when seeing English financial news and information about actions of US listed companies, why are mergers and acquisitions written like this: NAOV reverse stock split: 1 for 10? Is this a unique English grammar that doesn’t conform to Chinese grammatical habits? Based on this, please explain the meaning of the stock split.

Hello! This is a very good question, and many investors who speak Chinese as their mother tongue will have the same confusion when first encountering English financial news. This is indeed a specific expression habit in English in the field of finance, which differs greatly from the order of Chinese grammar. I will explain the meaning of the stock split to you in detail.

Why is a 1 for 10 Reverse Stock Split Written as “1 for 10”?

Let’s break down this expression: A for B

Within this structure:

A represents the new thing you will receive (the result).
B represents the old thing you are giving up (the cost/exchange).
The word “for” here means “in exchange for”.

Therefore, “1 for 10 reverse stock split” translates directly as: “1 new share for 10 old shares”.

In other words, your every 10 existing shares will be consolidated into 1 new share. This is precisely what the Chinese terms “10 combine with 1” or “10 shares merge into 1 share” mean.

Grammatical Habit Comparison

English Convention (Result for Reason/Cost): Places “the result obtained” at the front and “the cost paid” at the back. For example, You get 1 new share for your 10 old shares. Headlines are often shortened to 1 for 10 for brevity.
Chinese Convention (Reason/Cost -> Result): Tends to follow a chronological or logical order, stating “the original state” first, followed by “the resulting outcome.” For example, “(originally) 10 shares merged into (now) 1 share.”

Therefore, this isn’t a universal English grammar; it’s a very common convention and abbreviation used when expressing “exchange ratio” in business and finance. Illustrative Example (NAOV 1 for 10 Reverse Stock Split): Assume you hold 1000 shares of the NAOV company before a reverse stock split, with a share price of $0.5 per share.

Total Asset Value: 1000 shares * $0.5/share = $500 USD After the reverse split (1 for 10):
Number of Shares Held: 1000 shares / 10 = 100 shares
Theoretical Share Price: $0.5/share * 10 = $5 per share
Total Asset Value: 100 shares * $5/share = $500 USD

Conclusion: The primary purpose of the reverse stock split is to increase the price per share, which reduces the number of shares you hold, but (assuming no market fluctuations) your total asset value remains unchanged. Companies typically conduct reverse stock splits to meet exchange minimum price requirements (such as Nasdaq’s requirement for a share price to maintain above $1).

Stock Split Explanation

Once you understand consolidation, a stock split is easily understood. A stock split is the opposite of consolidation. English is typically written like this: 2 for 1 stock split or 3 for 1 stock split. Using the A for B structure we’ve learned above to interpret it: 2 for 1 stock split means: “You will receive 2 new shares in exchange for your 1 old share.” This is exactly what the Chinese phrase “1拆2” or “1股拆为2股” means.

Example (A Company’s 2 for 1 Stock Split):

Let’s assume that before the split, you hold 100 shares of a company with a stock price of $200 per share.

Total Asset Value: 100 shares * $200/share = $20,000 After the split (2 for 1):
Number of Shares Held: 100 shares * 2 = 200 shares
Price Per Share (Theoretically): $200/share / 2 = $100 per share
Total Asset Value: 200 shares * $100/share = $20,000

Conclusion: The purpose of a stock split is to lower the price per share, making it more attractive to small investors and increasing liquidity. It will increase your number of shares held, but equally so, your total asset value remains unchanged.

Summary

Company Action	Chinese Description	English Example	English Meaning	Impact on Share Holding Quantity	Impact on Stock Price per Share
Reverse Split	10合1	`1 for 10`	Exchange 10 old shares for 1 new share	Decrease	Increase

Summary

Company Action	Chinese Description	English Example	English Meaning	Impact on Shareholding Quantity	Impact on Stock Price per Share
Stock Split	1拆2	`2 for 1`	Exchange 1 old share for 2 new shares	Increase	Decrease

Summary

Hopefully, this explanation will help you better understand English financial news! It truly is a way of expression that requires a shift in mindset to get used to.

Hong Kong Stock Exchange Brokerage Fee Liberalization and Market Competition

Wed, 13 Aug 2025 21:47:51 +0800

The practice of “the same contract code, for transactions in the same direction, commission is only charged once” is commonly referred to as “Commission Aggregation / Combined Commission” within the securities industry. This is not a hard-and-fast regulation by the Hong Kong Exchange or regulatory bodies, but rather a business convention formed through market competition and brokers’ efforts to optimize customer experience.

Regarding HK stocks, when the same contract code is used for transactions in the same direction, only one commission is charged – does this have any historical business background?

Key Historical Turning Points: Cancellation of the Minimum Commission Rule in 2003

This is the most important background to understand this issue.

Pre-Reform (Before April 1, 2003): The Hong Kong stock market operated under a Minimum Commission Rule. At the time, brokers were required to charge clients a commission of no less than 0.25% of the transaction value. During this period, all brokerage commissions were essentially locked at the same level, and competition primarily focused on research capabilities, client relationships, and service quality; price wars were virtually non-existent. Therefore, there was no incentive to consolidate commissions for clients.
Post-Reform (After April 1, 2003): The Hong Kong Exchange officially abolished the Minimum Commission Rule, allowing brokers and clients to freely negotiate commission rates. This reform instantly ignited competition in the Hong Kong securities industry, particularly commission price wars.

A Product of Fierce Market Competition

Following the removal of minimum commission fees, securities firms (particularly emerging internet brokers) have adopted various innovative pricing strategies to attract customers. “Consolidated Commission” is one such highly attractive initiative.

Attracting Active Traders: For high-frequency traders or investors who prefer to buy and sell the same stock in batches (such as to avoid large single orders impacting market prices), per-trade fees can significantly increase transaction costs. The “Consolidated Commission” policy perfectly addresses this pain point, allowing investors to flexibly establish or liquidate positions within a day without worrying about multiple commission charges.
Reducing Customer Transaction Costs: This is the most direct objective. By consolidating calculations, customer actual commission expenses are reduced, making the broker’s platform more competitive in terms of cost.
Enhancing Customer Experience and Loyalty: This customer-friendly policy greatly enhances the user experience, making customers feel that the broker is looking out for their interests, thereby strengthening customer loyalty and retention.

Business Logic and Brokerage Interests

Although superficially, brokerage revenue appears to be declining, from a holistic business logic perspective, it’s a win-win situation:

Low Margin, High Volume: Reducing the effective cost of each transaction can stimulate customers to trade more frequently, thereby increasing overall trading volume. While brokers “give away” commissions on individual trades, they can compensate by increasing total transaction volume and earning other fees, such as platform usage fees and financing/margin interest.
Market Share Acquisition: In a fiercely competitive market, particularly for new internet brokerages, low commission rates and promotional policies are the most effective means of quickly acquiring users and capturing market share.

Key Points to Note

Not All Brokers Offer It: While “merged commission” has become mainstream, it’s still a broker’s business decision and not a mandatory regulation. Some traditional brokers or banks may still charge per trade for their securities services, so investors need to carefully review the broker’s fee schedule when choosing a broker.
Only Applies to “Commission”: Be sure to note that the calculated merged amount only includes the “commission” charged by the broker. Any “fixed fees” collected by the government or exchanges are calculated per trade and cannot be merged. These include:
- Stamp Duty (印花税): 0.1% (Paid by both buyer and seller, rounded up to the nearest dollar)
- SFC Transaction Levy (交易征费): 0.0027% (Collected by the Securities and Futures Commission)
- HKEX Trading Fee (交易费): 0.00565% (Collected by the Hong Kong Exchanges and Clearing)
- FRC Transaction Levy (会财局交易征费): 0.00015% (Collected by the Financial Regulatory Authority)

In summary, the “merged commission” policy of Hong Kong brokers is rooted in the abolition of the Minimum Commission System in 2003. It was a significant business strategy adopted by brokers in an environment of market liberalization and intense competition – to reduce customer costs, enhance service experience, attract and retain customers – representing a microcosm of Hong Kong’s financial market transitioning from traditional to modern, from high barriers to accessibility.

- Significant differences in trading and settlement between stocks and digital currencies

Mon, 28 Jul 2025 18:28:54 +0800

To truly understand the significant differences between traditional stocks and digital currencies in terms of trading and settlement, we need to deeply grasp the core “components” and “rules” that make up each ecosystem. We can view them as two entirely different games: one a rigorous, multi-party collaborative “professional league,” and the other a code-as-law, open-to-all “open world.”

Regarding the previous two questions, are there any foundational knowledge points we could explore to further expand this understanding? Let’s also compile some resources for you to learn more about this.

Part 1: The Foundation of Traditional Stock Markets – A Chain of Trust Composed of Professional Institutions

The core of traditional financial markets is “trust” and “intermediaries.” The entire system is designed as a multi-layered structure, with each stage played by regulated professional institutions to ensure market stability and security.

The Players

You (Investor): The starting and ending point of the transaction.
Broker: The sole gateway for you to enter the market. You cannot directly go to the Shanghai Stock Exchange or New York Stock Exchange to buy stocks; you must use a broker holding a license to execute your trading instructions and hold your funds and securities (as a nominal holder).
Stock Exchange: The market’s “trading floor”. Examples include the New York Stock Exchange (NYSE) and NASDAQ. Its primary function is to provide a fair, open venue where buy and sell offers meet (matching), thereby discovering prices. The exchange only handles order matching; it does not handle subsequent fund and stock transfers.
Central Counterparty Clearing Corporation (CCP): The market’s “risk guarantor”. This is at the core of risk management. After a trade is executed, the CCP intervenes between all buyers and sellers, becoming “all buyers to all sellers” and “all sellers to all buyers.” This way, any party’s default risk is borne by the CCP, preventing risks from spreading through the market like dominoes.
Central Securities Depository (CSD): The market’s “ultimate vault” and “master registry”. Examples include DTCC in the US and China’s ZSDEC. This is a crucial institution that electronically centralizes and custodians the vast majority of securities in the entire market.

Core Concepts: The “Paperless” and “Non-Moveable” Nature of Securities

Dematerialization: The stocks you buy today are not physical paper certificates, but a series of electronic records within a CSD (Central Securities Depository) database.
Immobilization: This is key to understanding settlement. When settlement occurs, there isn’t actually an “electronic stock file” being sent from one broker’s server to another. Instead, all the stocks are “fixed” stored in this central vault – the CSD. The settlement process simply involves the CSD making a transfer of shares from the seller broker’s omnibus account to the buyer broker’s omnibus account on its master ledger. Your broker then updates its own internal customer records to reflect that you now hold more shares.

This multi-tiered, clearly defined structure, while introducing time delays (T+N), has established a robust and mature risk isolation and management mechanism – the cornerstone of modern financial markets’ stable operation.

Part Two: The Foundation of the Digital Currency Market – A “Trustless” System Built on Code and Cryptography

Digital currencies aim to reduce or eliminate reliance on traditional intermediaries, with its foundation being “cryptographic proof” rather than “institutional trust.”

Core Technology (The Technology)

Blockchain / DLT (Distributed Ledger Technology): Think of it as a distributed, globally maintained ledger that cannot be altered, held by countless individuals. Every transaction is publicly recorded and verifiable by anyone, but no single person or institution can control it.
Public & Private Keys: This is the sole proof of ownership for your assets in the digital currency world.
- Public Key: Equivalent to your bank account number. You can safely share this with anyone to receive digital currencies. Your wallet address is generated from the public key.
- Private Key: Equivalent to your bank password + U盾 + signature combination, it’s the only key to access assets associated with that address. Whoever holds the private key has absolute control over the assets in that address. This is also the origin of the encryption world’s golden rule: “Not your keys, not your coins” (If you don’t hold the private key, you don’t own the cryptocurrency).
Crypto Wallet: It doesn’t store any “coins” (coins always reside on the blockchain). The wallet’s essence is a tool for managing your private key and helping you sign transactions with your private key to interact with the blockchain network.
Smart Contract: This is a piece of code that automatically executes on the blockchain. Its logic is “If…then…” (IF-THEN). For example, a decentralized exchange’s smart contract could be: “If I receive 1 ETH from User A, then automatically send 2000 USDC to User A’s address.” The entire process is automatically enforced by code with no human intervention and without requiring trust in anyone.

Core Rules: Consensus Mechanism

How do thousands of nodes in a network reach agreement on which transactions are valid when there is no central server? That’s the role of a consensus mechanism. The two most common types are:

Proof of Work (PoW): As exemplified by Bitcoin. It involves “miners” performing massive hash calculations (like solving an extremely difficult math problem) to compete for the right to record transactions. The first miner to solve the puzzle can package the latest transactions into a block and broadcast it to the entire network, which other nodes verify and accept. This method is highly energy-intensive but provides very high security.
Proof of Stake (PoS): Adopted by Ethereum after its upgrade. It no longer relies on a competition of computing power; instead, “validators” who hold and “stake” tokens are selected to create and validate blocks. The more tokens staked, the greater the probability of being chosen to record transactions. If they act maliciously, their staked tokens will be forfeited. This method is more energy-efficient and efficient.

Summary and Comparison

To better understand, we can use a table to summarize the fundamental differences between them:

| Asset Type | Electronic Ledger (Dematerialized) in CSD | Native Digital Token on Blockchain |

Summary and Comparison

Feature	Traditional Stock Market	Digital Currency Market
Proof of Ownership	Depository records (beneficial ownership)	Control over private keys (direct ownership)

Summary and Comparison

Feature	Traditional Stock Market	Digital Currency Market
Trust Model	Trust in regulated legal and financial institutions	Trust in open-source code and cryptographic proofs (“trustless”)

Summary and Comparison

Feature	Traditional Stock Market	Digital Currency Market
Core Ledger	Centralized ledger maintained by a CSD	Distributed ledger maintained by all network nodes

Summary and Comparison

Feature	Traditional Stock Market	Digital Currency Market
Counterparty	CCP (Central Counterparty)	The other party in the trade or smart contract

Summary and Comparison

Feature	Traditional Stock Market	Digital Currency Market

Summary and Comparison

Through the above additions, you can see that traditional finance relies on establishing a complex “trust chain” to manage risk and complete settlements; while digital currencies attempt to build a system without intermediaries using technological means (cryptography and distributed networks) to achieve self-validation. These two fundamentally different underlying logics determine the stark differences in all aspects of transactions, clearing, and settlement.

Why the concept of “settlement” is necessary in traditional stock trading?

Mon, 28 Jul 2025 00:18:46 +0800

In today’s era of the global digital wave, we’ve become accustomed to instant transfers and near-instant payments. Therefore, many people are confused: why, after clicking “sell” on a stock, does my funds not immediately clear in full and become available, but instead takes one or two business days? This is precisely a crucial and historically significant concept within traditional stock trading – settlement.

prompt: Why does traditional stock trading require the concept of settlement?

Here’s the English translation:

“Trading” and “Settlement” are two separate steps.

Trading: This refers to the moment you place a buy or sell order on an exchange that is successfully matched. At this point, you and your counterparty have reached a legally binding contract committing to exchanging stocks and funds at some point in the future.
Settlement: This is the process of fulfilling the terms of the agreed-upon contract – namely, the ownership of the stock officially and irrevocably transfers from seller to buyer, while the funds are officially and irrevocably transferred from the buyer’s account to the seller’s.

The need for these two separate steps and a time lag (such as T+1, T+2 systems) stems from historical evolution and rigorous risk management in finance.

Historical Roots: Originating in the “Paper” Era

Prior to the widespread adoption of computer systems, stocks were tangible paper certificates. Following a trade executed orally or through gestures at an exchange, subsequent work was incredibly laborious:

Physical Transportation: The seller’s brokerage firm needed to retrieve the corresponding stock certificate from its vault.
Endorsement Transfer: Signing and endorsing the back of the certificate to verify ownership transfer.
Manual Delivery: These certificates and associated checks had to be delivered by personnel (couriers) throughout the city to the buyer’s brokerage firm.
Verification & Reconciliation: The buyer’s brokerage firm needed to verify the authenticity of the certificates and the accuracy of the transaction details.

The entire process involved a significant amount of manual labor and physical transfer, riddled with delays and uncertainty. Consequently, an settlement cycle of several days (initially as long as T+5) was established to complete these complex processes. In the late 1960s, Wall Street was plunged into a “Paperwork Crisis” due to a surge in trading volume; a large number of trades could not be completed on time, even forcing exchanges to shorten trading hours. This directly spurred the establishment of modern electronic clearing systems.

Modern Core: An Unreplaceable Risk Management

Despite all transactions being electronic today, the T+N settlement system remains in place because its core function has evolved from “waiting for logistics” to managing the massive risks of the financial system. This process is primarily carried out by a key player – Central Counterparty (CCP) Clearinghouses, such as the Depository Trust & Clearing Corporation (DTCC) and the China Securities Depository and Clearing Corporation (CSDC) in the United States and China, respectively.

The settlement system is mainly designed to mitigate the following core risks:

Counterparty Risk

This is the most fundamental risk. If you sell shares, how can you be 100% certain that the buyer will pay on time? Conversely, how can the buyer be 100% certain that the seller will deliver genuine shares? If either party defaults, it could trigger a chain reaction.

Solution: The intervention of a Central Counterparty (CCP).

After a trade occurs, the CCP steps in between the buyer and seller, acting as both the seller’s “buyer” and the buyer’s “seller.” Through this legal arrangement called “novation,” the original buyer-seller relationship is no longer direct; instead, each party is responsible to the CCP.

For the Seller: As long as shares are delivered to the CCP, they will definitely receive money from the CCP.
For the Buyer: As long as money is delivered to the CCP, they will definitely receive shares from the CCP.

In this way, the default risk of a single participant is absorbed by the highly creditworthy central institution – the CCP – and does not spread throughout the market.

Clearing & Netting

A large brokerage firm handles millions of transactions in a single day, involving both buying and selling. If each transaction were processed individually, the system would be overwhelmed.

Solution: “Clearing” is performed before settlement date.

At the end of the trading day (T-day), clearing agencies consolidate all buy and sell transactions for each broker, known as “netting” or “clearing & netting.” For example, a brokerage firm might have bought $10 billion worth of stock and sold $9.8 billion on a given day. On settlement day, it only needs to pay a net difference of $20 million in cash, rather than engaging in a $19.8 billion exchange. Similarly, securities settlements are also processed on a net basis. This significantly improves the efficiency of the entire market and reduces liquidity requirements.

The Complete Lifecycle of a Stock Transaction

Let’s take a simple example to see the entire process from trade to settlement (using a T+2 model):

T Day (Trading Day): You click “Buy” 100 shares of a company’s stock in the morning and it immediately executes. At this point, you reach an agreement with the seller, but ownership of the stock and funds has not yet transferred.
T Day Aftermarket ~ T+1 Day (Clearing Period):
- The exchange sends your trade data to the Central Clearing Corporation (CCP).
- The CCP confirms the transaction information is accurate and performs a “contract swap,” becoming your counterparty for the trade.
- The CCP calculates the net amount of all your trades on that day through your brokerage firm, and notifies your broker how much money and securities you need to deliver by T+2.
T+2 Day (Settlement Day):
- In the morning, your broker transfers the net settlement funds to the CCP.
- The CCP confirms receipt of the funds and instructs the Securities Custody Agency to transfer 100 shares of stock from the seller’s brokerage account to your brokerage account.
- Your broker updates your account information internally, showing that you now hold these 100 shares of stock.

At this point, settlement is complete, and you officially become the legal owner of these 100 shares of stock, with the right to receive dividends, participate in voting, etc.

In essence, the traditional concept of “settlement” in stock trading is a product of historical practice combined with modern risk control theory. It evolved from a mechanism to solve the problem of paper-based certificate circulation into a core system that uses a central counterparty and net settlement to ensure the stability and efficiency of the entire financial market. This seemingly “delayed” design is actually the key firewall protecting every investor from counterparty default risks.

Over-the-Counter (OTC) Clearing and Settlement of Digital Currencies: Unveiling the Mechanisms Behind 7x24 Continuous Trading

Mon, 28 Jul 2025 00:03:32 +0800

Unlike traditional stock markets with defined opening and closing times, the digital currency market has attracted the attention of global investors due to its 7x24-hour continuous trading feature. This characteristic has also raised a core question: how are digital currencies cleared and settled in a world without a “market close” concept? Does it completely overturn these concepts in traditional finance? The answer is that digital currencies not only have clearing and settlement, but the way they are implemented and their system design are key to supporting all-day trading.

Core Difference: From T+2 to Real-Time Settlement

Traditional stock trading follows a “T+N” settlement system (e.g., T+1 in China, T+2 in the US), meaning that the actual transfer of funds and securities after a trade is executed (on day T) takes one or more business days to complete. During this period, clearing agencies conduct offsetting, calculate the receivables and payables of each party, and settle differences. Digital currencies have completely changed this model. Its core settlement and delivery can be summarized as “Trade-to-Clear, Clear-to-Deliver,” primarily due to its underlying blockchain technology.

Blockchain: A Natural Real-Time Full Settlement System

Blockchain itself can be considered a decentralized, immutable public ledger. Each transaction is recorded in a “block” and linked to the previous block through cryptographic methods, forming an irreversible “chain.” This process has the following key characteristics:

Real-Time: Once a transaction is validated by nodes on the network and packaged into a block, the transfer of assets is completed. Although confirmation times vary depending on the congestion and block generation speed of different blockchain networks (such as Bitcoin and Ethereum), ranging from seconds to several minutes, this is a qualitative leap compared to traditional finance’s “T+N.”
Full Settlement: Unlike net settlement in traditional clearing systems, each transaction on the blockchain is independent and fully executed. When A transfers a bitcoin to B, it is clearly recorded in the ledger as A’s address decreasing by one and B’s address increasing by one, without any netting of multiple transactions before transfer.
Finality: Once a block has been confirmed by enough subsequent blocks, this transaction is considered “final” and irreversible. This means that once settled, no one can undo or modify it.

Therefore, fundamentally, asset settlement occurs on the blockchain, automatically completed through network consensus, without the need for traditional central clearing counterparties (CCPs) or custodians.

Centralized vs. Decentralized Exchanges: Different Clearing and Settlement Pathways

Although the underlying technology is decentralized, the primary venues where users conduct digital currency transactions – exchanges – are divided into two types: centralized (CEX) and decentralized (DEX), which have different clearing and settlement mechanisms.

Centralized Exchanges (CEX): Internal Clearing + On-Chain Settlement

When users trade on centralized exchanges like Binance and Coinbase, they are actually operating within the exchange’s internal centralized ledger, rather than directly on the blockchain.

Internal Clearing (Ledgering): When users deposit digital currencies or fiat currency into an exchange, the exchange records corresponding balances in its database for the user’s account. All buy and sell actions a user takes on the platform, such as buying BTC with USDT, essentially just represents increases and decreases in numbers within different accounts in the exchange’s database. This process is completed quickly by the exchange’s “matching engine,” which can be considered a real-time internal clearing.
On-Chain Settlement (Withdrawal/Deposit): The actual settlement that occurs on the blockchain only happens when users “deposit” (transfer from an external wallet into the exchange) and “withdraw” (transfer out of the exchange to an external wallet). At this point, the exchange initiates a chain transaction to truly transfer asset ownership.

System Design Key Points:

High-Performance Matching Engine: Ensures rapid order matching under high concurrency.
Cold & Hot Wallet Separation: Most user assets are stored in offline “cold wallets” to ensure security, while a small amount of assets is kept in online “hot wallets” to meet users’ daily withdrawal needs. This is the core design for ensuring 7x24 hours of asset safety operation.
Internal Ledger Database: Utilizes a high-performance distributed database to ensure the accuracy and immediacy of internal transaction records.

Decentralized Exchanges (DEXs): On-Chain Atomic Swaps

In decentralized exchanges like Uniswap and SushiSwap, the trading process is radically different. Users always maintain control over their own wallet private keys, and transactions are executed directly on-chain through “smart contracts.”

Atomic Swap: This is the core of how DEXs clear and settle trades. A smart contract is a program that automatically executes on a blockchain, ensuring that the exchange of assets is “atomic”—either both parties successfully exchange their assets, or neither does—preventing one party from sending assets without receiving confirmation from the other.
Clearing and Settlement Synchronized: Users authorize interactions with smart contracts through their wallets. Once a transaction is triggered and confirmed on the blockchain, clearing and settlement are instantly completed in a single step. The entire process requires no trust in any centralized intermediaries.

System Design Key Points:

Smart Contracts: The core logic of the exchange, including trading pairs, liquidity pools, and pricing algorithms (such as Automated Market Makers - AMMs) are all hardcoded into the smart contract, making them public and transparent.
On-Chain Oracles: Used to securely feed external market price information onto the blockchain, providing price references for certain types of DEXs.
Frontend: Provides a web or app interface that allows users to connect their wallets and interact with the backend smart contracts.

Summary: The New Paradigm for Digital Currency Clearing and Settlement

In essence, digital currencies are not without the concepts of clearing and settlement; rather, they have transformed from a multi-party, time-consuming back-office process into an efficient, transparent, and even real-time automated one through blockchain technology and innovative system designs.

Clearing Concepts Remain: This is evident in CEXs as real-time matching and ledger accounting, and in DEXs, smart contracts incorporate clearing rules.
Settlement is the Core Transformation: Finality of settlement is guaranteed by blockchain consensus, enabling near real-time asset transfers – a cornerstone supporting 7x24 uninterrupted trading.
System Design Serves Uninterrupted Operation: Whether it’s CEX cold and hot wallet architectures or DEX automated smart contracts, the primary design objective is to achieve a transaction environment without manual intervention and never closed, while ensuring security.

This disruptive clearing and settlement mechanism is not only a significant distinguishing feature of digital currency markets compared to traditional finance but also provides important insights into the future evolution of financial infrastructure.

RWA (Real World Assets) and Web3: A New Bottle of Old Wine?

Mon, 21 Jul 2025 19:48:39 +0800

Driven by the tide of technological innovation, RWA (Real World Assets) and Web3 have become hot topics in the financial industry. Traditional financial institutions – once regarded as conservative and stable giants – are now actively embracing these emerging concepts, vigorously promoting the development of RWA and DeFi (Decentralized Finance). However, behind this technology-driven transformation lies a core question worth pondering: Are these dazzling new concepts truly disruptive innovation, or simply giving traditional financial businesses a “new look”?

RWA and Web3: Decoding Core Concepts

RWA (Real World Assets), referring to real-world assets, are tangible or intangible assets from the physical world that are issued and traded as digital assets on a blockchain through “tokenization” technology. These assets can encompass real estate, bonds, private credit, artwork, carbon credits, and more. Its core value lies in:

Enhancing Liquidity: Dividing illiquid assets (such as real estate) into smaller shares, reducing investment barriers, and enabling them to be traded easily on secondary markets like stocks.
Improving Transparency and Efficiency: Utilizing blockchain’s immutability and traceability to simplify asset issuance, trading, and settlement processes, reduce intermediaries and human error, ultimately lowering costs and improving efficiency.
Expanding Financing Channels: Providing asset owners with a globalized, more efficient financing platform, breaking down geographical and traditional financial intermediary restrictions.

Web3, often referred to as “the next generation internet,” has core principles of building a decentralized, user-owned and controlled internet ecosystem. Unlike the Web2 era dominated by a few tech giants, Web3 is based on blockchain technology, aiming to return data ownership and control to users. Its key features include:

Decentralization: Information and applications are no longer stored on single company servers but distributed across numerous nodes in the network, reducing the risk of single points of failure and censorship.
User Sovereignty: Users have greater control over their personal data, choosing with whom to share it and how it is used.
Permissionless and Censorship-Resistant: Anyone can participate in the network, publish applications or use services without needing approval from centralized authorities.

Why Are Traditional Financial Institutions Embracing RWA and DeFi?

Traditional financial institutions are actively pushing for RWA and DeFi primarily due to the following strategic considerations:

Efficiency Gains & Cost Reduction: The traditional financial system is characterized by significant manual auditing, complex clearing and settlement processes, and burdensome compliance steps, leading to inefficiency and high costs. Through smart contracts and blockchain technology, DeFi and RWA can automate many of these processes, significantly reducing operational costs.
Creating New Revenue Streams & Markets: The emergence of RWA has opened up new asset classes and business models for financial institutions. For example, providing tokenized services for real estate or private credit projects, underwriting, and trading can generate new fees and consulting revenue.
Responding to Competition & Maintaining Leadership: Competition from fintech companies and crypto native enterprises is intensifying. By proactively positioning themselves in RWA and DeFi, traditional financial institutions can demonstrate their innovative capabilities, attract a new generation of clients, and secure a favorable position in the future financial landscape.
Enhancing Transparency & Risk Management: The transparency offered by blockchain helps improve the visibility of underlying asset information, allowing investors to better assess risks. Furthermore, standardized token protocols and automated compliance checks can also enhance risk management efficiency.

Business Essence: New Wine in an Old Bottle?

Despite RWA and DeFi bringing innovation in technology and models, from a core business logic perspective, the current RWA-related businesses undertaken by traditional financial institutions are largely extensions and digital upgrades of their traditional businesses.

Taking RWA as an example, its core is to tokenize traditional assets. This process bears a striking resemblance to traditional Asset Securitization (ABS). ABS involves transforming illiquid assets with predictable cash flows into tradable securities in financial markets through packaging and layering. RWA simply shifts the carrier of securitization from traditional electronic certificates to blockchain-based tokens. Its essence remains credit intermediation and asset management – selecting high-quality assets, structuring them, and selling them to investors. For example, packaging the future rental income rights of a commercial property into tokens is no different than issuing Real Estate Investment Trusts (REITs) in terms of its core financial nature.

Similarly, in the DeFi sector, although its “decentralized” concept aims to disrupt traditional financial intermediaries, the way current institutions are participating is primarily to utilize their technological advantages to optimize existing businesses. For example, using smart contracts to simplify loan approval and disbursement processes or conducting more efficient cross-border payments and settlements through decentralized exchanges. Its core business of lending, trading, and payment remains the cornerstone of the financial system.

It can be said that traditional financial institutions driving RWA and DeFi is more like a “self-revolution,” namely, without changing its core financial functions, using new technologies to improve efficiency, reduce costs, and expand markets. They are not trying to completely overthrow themselves but rather hope to consolidate and expand their industry position through technological innovation.

In conclusion, RWA and Web3 have undoubtedly brought profound changes to the financial industry. They have solved many pain points in traditional finance through technology. However, for traditional financial institutions at this stage, embracing these technologies is more like a cautious and pragmatic strategic choice. Its core business logic has not fundamentally changed, still revolving around assets, credit, and transactions – these ancient financial themes. As technology matures and regulation improves, we may see more disruptive financial innovations; however, given the current situation, “new wine in an old bottle” is perhaps the most accurate description.

Digital Currency Fundamentals

Mon, 21 Jul 2025 19:30:00 +0800

We use an easy-to-understand analogy to explain the relationship between digital currency “mining” and “accounting,” as well as why Bitcoin and Ethereum have different supply caps.

Okay, let’s use an easy-to-understand analogy to explain the relationship between digital currency “mining” and “accounting,” as well as why Bitcoin and Ethereum have different supply caps.

Mining and Accounting: A Public Participation Ledger Competition

Imagine the entire Bitcoin network as a massive, public, and transparent electronic ledger. Every Bitcoin transaction (such as Zhang San sending a Bitcoin to Li Si) that occurs anywhere in the world needs to be recorded onto this large ledger for the transaction to be considered successful.

But who records these transactions? If anyone could just write them down arbitrarily, it would become chaotic!

To solve this problem, the Bitcoin system has designed an ongoing “accounting competition.”

Accounting (Bookkeeping): This involves bundling all transactions that have occurred in the past approximately 10 minutes into a “block” (which can be understood as a page of the ledger). This block not only includes transaction records but also contains a link to the previous “block” (the previous page of the ledger), linking one page after another to form an immutable chain, which is called “blockchain.”
Mining: The core issue is: who has the right to record this page? The answer is: whoever first solves an extremely complex mathematical problem gets the accounting rights for that time. This solving process is形象地称为“mining”.
- Why is it called “Mining”? Because this process requires a large amount of computing resources (mining machines) and energy (power), just like real-world mining requires equipment and labor.
- What is the purpose of solving the problem? This mathematical problem itself has no practical meaning; its sole purpose is to increase the difficulty of accounting, ensuring that an average person (or a mining pool) can solve it approximately every 10 minutes. This guarantees stable ledger update speed and ensures system security. Anyone who wants to tamper with the ledger must have twice the computing power of the entire network, which is practically impossible economically.

Therefore, the relationship between mining and accounting can be summarized as:

“Mining” is the process of competing for “accounting rights,” while “Accounting” is the reward and responsibility after successfully “mining.”

Mining and Accounting: A Public Participation Ledger Competition

Successful “miners” who successfully mine a block will perform two tasks:

Package the latest transactions into a new block and connect it to the blockchain (completing the accounting).
Receive rewards granted by the system. This reward consists of two parts:
- Block Reward: The system automatically generates a batch of newly created Bitcoins as a reward. This is the only way that new Bitcoin is created.
- Transaction Fees: The fees paid by the payers of all transactions within the block.

Why Does Bitcoin Have a Cap, While Ethereum Doesn’t?

This involves fundamental differences in the design philosophy and objectives of these two cryptocurrencies.

Bitcoin: Digital Gold, Limited Supply

Bitcoin was designed from the outset to be a value storage tool like gold. Gold is valuable for one key reason: its scarcity – the amount on Earth is finite.

To mimic this scarcity, Satoshi Nakamoto, the creator of Bitcoin, established two immutable rules during design:

Limited Supply: The total supply of Bitcoin is permanently limited to 21 million coins. Not a fraction more, not a fraction less.
Halving Production: Approximately every four years (or with every 210,000 blocks mined), the block reward earned by miners will be reduced in half.
- 2009 began at 50 BTC
- 2012 halving to 25 BTC
- 2016 halving to 12.5 BTC
- 2020 halving to 6.25 BTC
- 2024 halving to 3.125 BTC
- …and so on, until approximately 2140, when the new reward will approach zero indefinitely.

This design gives Bitcoin deflationary characteristics. Over time, the output of new coins decreases, and if demand remains constant or increases, its value theoretically rises. This reinforces its positioning as “digital gold.” Once all bitcoins have been mined, miners’ income will depend entirely on transaction fees.

Ethereum: Decentralized Application Platform, More Flexible Supply Strategy

Ethereum’s goals differ from Bitcoin. It’s not just a digital currency; it’s a “world computer,” a platform designed to run smart contracts and decentralized applications (DApps).

You can imagine Ethereum as a decentralized “app store” and “operating system.” Within this system, you need to pay “gas fees” to run your programs or make transactions, and this gas is Ether (ETH).

To maintain this vast and complex system, Ethereum continuously incentivizes miners (now validators) to protect the network’s security. If a hard cap were set like Bitcoin’s, with no new coins being mined after it’s finished, whether transaction fees alone would be sufficient to guarantee the network’s long-term security is unknown.

Therefore, Ethereum chose a no-hard-cap strategy. However, this doesn’t mean it will experience unlimited inflation. Ethereum’s monetary policy has undergone several significant adjustments:

Early (Proof-of-Work PoW): Similar to Bitcoin, new coins were generated through mining, but there was no fixed total limit or set halving cycle. This resulted in a relatively high inflation rate.
London Upgrade (EIP-1559): Introduced an “burn fee” mechanism. A portion of the base fees paid by users for transactions would be directly “burned” (permanently removed from circulation) instead of going to miners. This meant that when the network was active with transactions, the amount of ETH burned could exceed the newly issued amount, leading to deflation.
The Merge (The Merge): Ethereum transitioned from “mining” (Proof-of-Work PoW) to “staking” (Proof-of-Stake PoS). No longer do miners expend electricity solving problems; instead, “validators” earn accounting rights and rewards by staking their own ETH. This shift significantly reduced the issuance rate of new ETH (over 90%).

In summary, here are Ethereum’s key characteristics:

No Hard Cap: Provides flexibility for the network’s long-term security and development.
Dynamic Supply: Through “burn mechanisms” and “staking rewards,” its total supply can be mildly inflationary or experience deflation during periods of high transaction activity. Its goal isn’t absolute scarcity, but rather to maintain sufficient security while ensuring ETH remains available as “fuel.”

Key Differences Overview

Feature	Bitcoin	Ethereum
Core Purpose	Digital Gold, Value Storage	World Computer, Decentralized Application Platform

Key Differences Overview

Feature	Bitcoin	Ethereum
Total Supply Limit	Yes, 21 Million coins	No

Key Differences Overview

Feature	Bitcoin (BTC)	Ethereum (ETH)
Monetary Policy	Deflationary (Fixed supply, halving production)	Dynamic Supply (Minting + Burning, potentially inflationary or deflationary)

Key Differences Overview

Feature	Bitcoin	Ethereum
Issuance Purpose	Reward miners until the block is mined	Long-term, continuous security and operation of the network

Key Differences Overview

Hopefully, this straightforward explanation will help you understand their relationship and differences!

HKSG Flash Crash Sell-Off Case

Mon, 21 Jul 2025 19:12:21 +0800

[The company recently raised capital in the Hong Kong market](Nine Fang Zhi Tu.pdf), this fundraising is similar to Xiaomi’s operation, and this article breaks down the details. –>

Nine Fang Intelligent Investment and Sales Interpretation

What are the fees associated with participating in the offering; when can these stocks be sold, what other important information is contained in this document?

✅ Fees Associated with Placement

This placement activity is a pre-existing shareholder first, then new placement method, targeting new investors (placements), does not involve retail investor subscriptions, therefore:

If you are not a placement agent-selected placement recipient (i.e., professional/institutional/individual investors), you do not need to pay any fees.

✅ Fees Associated with Placement

However, if you are a placement agent, the fees involved include: | Placement Price | ✅ Yes | HKD 39.25 per share |

✅ Fees Associated with Reselling

Fee Type	Borne by Reseller	Notes
Commission	✅ Yes	Resell price excludes commission, transaction fees, stamp duty etc.

✅ Fees Associated with Brokerage Arrangement

Fee Type	Borne by Brokerage Agent	Notes
Transaction Fee / Exchange Trading Fee	✅ Yes	Charged according to Hong Kong Stock Exchange rules

✅ Fees Associated with Brokerage Arrangements

Fee Type	Borne by Broker	Notes
Stamp Duty	✅ Yes	Stamp duty of 0.13% is payable for Hong Kong stock purchases

✅ Costs Associated with Distribution

✅ When Shares Can Be Sold

Based on the announcement content:

“The share placement will be undertaken by the placing agents based on their best efforts to place shares with no less than six noteholders… It is anticipated that none of the noteholders will become a major shareholder of the Company immediately following completion of the share placement.”

✅ When Can Shares Sold?

This means:

Shares sold through the placement can be freely traded once settlement is complete;
There is no lock-up period;
They can be bought and sold freely on the Hong Kong Stock Exchange secondary market;
The placement deadline is July 17, 2025, with expected settlement to occur shortly after July 17th.

✅ Important Information in Announcement

Use of Funds (HK$7.4622 Billion Net)

Nine Square Capital will use this money to do four things: | On-Chain Financial Resource Investment | Undefined | Invest in RWA underlying assets, digital asset exchanges, trust banks, and stablecoin operators |

#### **Funding Allocation (HK$7.4622 Billion Net)**
| Purpose | Percentage | Description |
|---|---|---|
| Digital Asset Services Layout | Undefined | Investment services for digital assets targeting consumers in Hong Kong and the Middle East regions |

#### **Funding Allocation (HK$7.4622 Billion Net)**
| Purpose | Percentage | Description |
|---|---|---|
| Digital Asset Investment Advisory New Model | Unspecified | AI + Research, Combining MCN Operational Experience |

Funding Allocation (HK$7.4622 Billion Net)

Purpose	Percentage	Description
Supplemental Liquidity Funding	Unspecified	General corporate use

Offer Price Discount is Significant

Discounted by 6.0% compared to the closing price of 41.75 HKD on July 15th
Discounted by 17.0% compared to the past 5-day average price of 47.30 HKD
Discounted by 15.3% compared to the past 10-day average price of 46.36 HKD

#### **Share Structure Changes**

- Following the public offering, **total shares outstanding increased from 448 million to 468 million**.
- Existing shareholders’ ownership percentages were **slightly diluted**, but they **continue to maintain a controlling stake**.
- An additional 20,000,000 shares will be held by the underwriters, representing approximately **4.27%** of total outstanding shares.

Risk Disclaimer

The offering may not be completed, and requires fulfillment of multiple prerequisites (such as market stability, regulatory approval, and the absence of significant adverse events)
If it is not completed within 14 days, the subscription matter will automatically become invalid.

✅ Summary in one sentence

Retail investors are excluded from this placement; the placed shares have no lock-up period and can be traded immediately after settlement. Jiu Fang Investment plans to use HK$746 million to invest in digital assets and on-chain finance, potentially transitioning towards Web3 and AI robo-advisor directions in the future.

“First Old, Then New” Distribution Method Explained

Kimi: “Existing shareholders first old shares then new” is a common Hong Kong distribution method, known in English as Top-up Placement, which you can understand as a two-step operation of “major shareholders sell old shares first and then subscribe to new shares”.

✅ Let’s take an example to understand it

Taking the case of Jiutian Intelligence Investment as an example:

Step 1: Major shareholders sell old shares (First Old)
- Existing shareholders (such as Coreworth Investments) sell their existing holdings of 20,000,000 old shares to market investors (the underwriter) at a price of HKD 39.25 per share.
- This results in the major shareholder reducing their holding, and the total issued capital remains unchanged.

Step 2: Company issues new shares to major shareholders (Later New)
- The company then issues an equal number (20,000,000 shares) of new shares to these major shareholders at a price of HKD 39.25.
- The major shareholder uses the proceeds from selling old shares to buy back new shares, restoring their holding quantity to its original state.
- However, the total issued capital increases (from 448 million shares to 468 million shares), effectively meaning the company has successfully raised capital, while the major shareholder’s shareholding ratio is slightly diluted.

✅ Why are we doing this?

Purpose	Explanation
Quick Fundraising	Avoid the lengthy process of issuing new shares, instead selling old shares first and then supplementing with new shares to quickly raise capital.

✅ Why are we doing this?

Purpose	Explanation
Maintain Control	The majority shareholders will maintain their voting power, and control won’t be significantly diluted.

✅ Why are we doing this?

Purpose	Explanation
Attract New Investors	Through discounted share sales (private placements), attract institutional or high-net-worth investors to enter the market, optimizing the shareholder structure.

✅ Why are we doing this?

✅ Key Differences: Old Stocks vs. New Stocks

Type	Newly Issued Shares	Immediately Tradeable	Description
Old Stocks	❌ Not newly issued	✅ Can be immediately traded	These are existing shares on the market, which can be directly circulated after being sold to new investors.

✅ Key Differences: Old Stocks vs. New Stocks

Type	Newly Issued Shares	Immediately Tradeable	Description
New Shares	✅ Newly issued	⚠️ Lock-up Period (typically 180 days)	Shares newly issued by the company, given to original shareholders, and typically require a lock-up period.

✅ Key Differences: Old Stocks vs. New Stocks

✅ One-Sentence Summary

“Sell Old, Buy New” refers to major shareholders initially selling their existing shares to the market and then purchasing an equal amount of new shares from the company, simultaneously raising capital for the company while maintaining control.

Hong Kong Stock Connect Issuance Rules Interpretation

Kimi: Your question is very central: Why do Hong Kong-listed companies seem to be able to “freely” issue shares? Is the Hong Kong market rulebook particularly relaxed? The answer is: Yes, HKEX offers significantly more flexibility than the Shanghai A-share market, but it’s not “unlimited,” rather there’s a system of “relaxed but limited” rules.”

✅ H Shares vs A Shares: Issuance Rules Comparison (Key Differences)

Project	H Share Rules	A Share Rules
Does it require shareholder meeting approval?	✅ The Board of Directors can authorize share issuance not exceeding 20% of the total equity annually at the annual general meeting, and no further meetings are required thereafter.	❌ Each issuance must be held with a separate shareholder meeting and pass by a 2/3 majority vote.

✅ H-Shares vs A-Shares: Issuance Rules Comparison (Key Differences)

Project	H-Share Rules	A-Share Rules
Does it require SEC approval?	❌ As long as it’s no more than 20% of share capital + offering price is no more than 20%, it can “flash allocation”	✅ Must undergo SEC case-by-case review, which takes longer

✅ H Shares vs A Shares: IPO Rules Comparison (Key Differences)

Project	H Share Rules	A Share Rules
Maximum Issuance Ratio	✅ Maximum of 20% per issuance, cumulative dilution within 12 months shall not exceed 25%	✅ Generally not exceeding 30%

✅ H-Shares vs A-Shares: Issuance Rules Comparison (Key Differences)

Project	H-Share Rules	A-Share Rules
Discount Margin Limit	✅ Offering price shall not be lower than 80% of the market price (maximum discount of 20%)	✅ Non-public placements shall not be lower than 80% of the market price

✅ H Shares vs A Shares: IPO Rules Comparison (Key Differences)

Project	H Share Rules	A-Share Rules
Lock-up Period	✅ Typically 30 days or none	✅ 6~36 months

✅ H Shares vs A Shares: Issuance Rules Comparison (Key Differences)

Project	H Share Rules	A-Share Rules
Use of Proceeds Restrictions	✅ Disclosure of use only, no substantive review	✅ Must detail use of proceeds, SEC can veto

✅ Hong Kong Stocks vs. A Shares: Issuance Rules Comparison (Key Differences)

✅ Why Does the Hong Kong Stock Exchange Look “Casual”?

“General Mandate” Mechanism: Once a year, shareholders authorize the board to issue up to 20% new shares at their annual general meeting. Afterwards, no further shareholder meetings are required, and the board can selectively issue shares.
“Flash Placement” Mechanism: If the issuance does not exceed 20% of the share capital and the discount is no more than 20%, the issuance can be completed within 24 hours without approval.
No SEC Case-by-Case Approval: The Hong Kong Stock Exchange only conducts formative review, without substantive intervention in the use of funds or company quality.

✅ Let’s take an example: Why was JiuFang ZhiTou able to “do old and new” this time?

JiuFang ZhiTou obtained a general authorization at the 2025 June 20th shareholder meeting, allowing for up to a 20% increase in new shares (i.e., up to 89,671,400 shares).
This issuance of 20,000,000 shares represents only 4.46% of the capital, far below the 20% limit, and fully complies with the authorization conditions.
Therefore, no further shareholder meeting is needed nor is approval from the Securities Regulatory Commission required; the board of directors can make the decision to implement it.

✅ Summary in one sentence

Hong Kong stocks allow “board of directors + annual authorization” rapid issuance under a streamlined process, provided it doesn’t exceed 20% of the share capital and the price cap, enabling “flash placement,” while A-shares require shareholder approval plus SEC review, resulting in a longer, more restrictive procedure.

✅ Summary in one sentence

Therefore, Jiu Fang Zhi Tu (Nine Fang Intelligent Investment) is not “arbitrary issuance,” but rather legally and compliantly utilized the relaxed mechanisms of the Hong Kong stock market.

Comprehensive Analysis: Capital Gains Tax, CRS, and Inland Resident Hong Kong & US Stocks Investment Tax Guide

Wed, 16 Jul 2025 21:12:40 +0800

For mainland residents investing in Hong Kong and US stocks, understanding relevant tax regulations is crucial. This article will comprehensively analyze what capital gains tax is, why it applies to investments in Hong Kong and US stocks, and explain the workings of CRS (Common Reporting Standard). Furthermore, this article will also provide detailed answers regarding the tax responsibilities and specific tax rates for mainland residents investing in Hong Kong and US stocks through various channels (Hong Kong brokers, Hong Kong-Shanghai Link, and Shenzhen-Hong Kong Link).

Core Concept Breakdown

What is Capital Gains Tax (CGT)?

Capital Gains Tax (CGT), often abbreviated as CGT, is a tax levied on the profits realized from selling assets. These assets can include stocks, bonds, real estate, precious metals, and more. When you sell an asset for a price higher than your purchase price, the resulting gains (known as capital gains) may be subject to Capital Gains Tax.

Please note that not all countries or regions levy Capital Gains Tax. For example, Hong Kong currently does not impose Capital Gains Tax.

Why are Hong Kong and US Stocks Subject to Capital Gains Tax?

US Stocks: The United States is a country that levies capital gains tax. For non-U.S. taxpayers (such as most mainland investors), while selling US stocks typically qualifies for exemption from capital gains tax, certain conditions must be met (e.g., residency in the U.S. for no more than 183 days within a year). However, dividends received from US stocks are subject to withholding income tax at a rate of usually 30%, but according to the China-U.S. Tax Agreement, mainland Chinese residents can apply to reduce this rate to 10%.
Hong Kong Stocks: As stated above, Hong Kong does not levy capital gains tax. Therefore, regardless of the channel through which you trade Hong Kong stocks, no tax is payable on the difference between purchase and sale prices. This doesn’t mean that mainland residents don’t need to declare this income to the Chinese mainland tax authorities.

What is CRS Reporting (Common Reporting Standard)?

CRS, or the “Common Reporting Standard,” is a global standard for the automatic exchange of financial account information. Its primary purpose is to combat tax evasion involving offshore accounts and cross-border tax avoidance.

How it Works: In simple terms, financial institutions (such as banks and brokers) that have signed up to CRS need to identify the non-resident taxpayers’ accounts and report their account information (including names, addresses, taxpayer status, account balances, and annual total income) to their local tax authorities. These tax authorities then exchange this information with the relevant tax authorities of the countries/territories where the account holders are residents.

Impact on Mainland Investors: For mainland residents who open accounts with Hong Kong brokers, due to their tax residency being China, Hong Kong financial institutions will exchange their account information through the Hong Kong Customs and Excise Department to the Chinese State Taxation Administration. This means that the inland tax authorities can gain access to information about its residents’ overseas financial assets and income, providing a basis for collecting global income.

Inland Resident Hong Kong & US Stock Trading Tax Breakdown

According to China’s Personal Income Tax Law, Chinese tax residents are required to pay personal income tax on their income sourced globally. This means that even if investment gains occur abroad and may be exempt in the local jurisdiction, there is still an obligation to declare and pay taxes to the Chinese tax authorities.

Recently, the Chinese tax department has intensified its enforcement of taxation regarding individual overseas income.

Trading Hong Kong and US Stocks via Hong Kong Brokers

If you are a mainland resident, trading Hong Kong and US stocks through Hong Kong brokers (such as Futu Securities, Tiger Brokerage, etc.), your tax responsibilities are as follows:

US Stock Trading:
- Capital Gains: The profits you receive from the difference between buying and selling US stocks belong to “transfer pricing income.” According to China’s Personal Income Tax Law, it should be declared and paid at a rate of 20% to the Chinese tax authorities. Although the United States typically exempts non-residents from capital gains taxes, Chinese tax residents still need to pay taxes on this global income.
- Dividends: Dividends received from US stocks will usually have 10% withheld by the broker as estimated income tax (enjoying preferential tax agreements between China and the US). This tax paid abroad can be offset when declaring it in China, but the offset amount cannot exceed the taxable amount calculated according to Chinese tax laws.
Hong Kong Stock Trading:
- Capital Gains: Although Hong Kong does not levy capital gains tax, profits from Hong Kong stock trading (price differences) are also considered “transfer pricing income” and must be declared and paid at a rate of 20% to the Chinese tax authorities.
- Dividends: Dividends received from H shares (companies registered in mainland China and listed on the Hong Kong Stock Exchange) will have 20% personal income tax withheld by the company. Dividends received from non-H shares (companies registered in Hong Kong or overseas and listed on the Hong Kong Stock Exchange) will have 10% dividend tax withheld in Hong Kong. This tax paid abroad can also be offset when declaring it in China.

Trading Hong Kong Stocks via the HKSAR-Mainland China Bond Connect (HK & SH)

To promote capital market connectivity between Mainland China and Hong Kong, the government has introduced targeted tax incentives.

Capital Gains: According to announcements from the Ministry of Finance, the State Taxation Administration, and the Securities and Futures Commission, personal income tax is currently exempted on any capital gains realized by mainland individual investors through the HKSAR-Mainland China Bond Connect (HK & SH) when buying and selling listed stocks on the Hong Kong Stock Exchange. This incentive policy has been explicitly extended to December 31, 2027.
Dividend Income:
- For dividend income received from investing in Hong Kong H Shares via the HKSAR-Mainland China Bond Connect (HK & SH), the H Share company will withhold personal income tax at a rate of 20%.
- For dividend income received from investing in Hong Kong Non-H Shares via the HKSAR-Mainland China Bond Connect (HK & SH), China Merchants Service Bureau will withhold personal income tax at a rate of 20%. Any pre-paid personal income tax paid in Hong Kong can be claimed for tax refund by submitting a valid withholding certificate to the relevant tax authority of China Merchants Service Bureau.

Tax Highlights Summary

Investment Channel	Investment Target	Capital Gains Tax	Dividend/Bonus Tax
Hong Kong Brokerage Firms	US Stocks	Reported to Mainland, 20% Rate	US Withholding 10%, Can be Deducible in Mainland

Tax Highlights Summary

Investment Channel	Investment Target	Capital Gains Tax	Dividend/Bonus Tax
	Hong Kong Stocks	Reported to Mainland, Rate 20%	H Shares: Withheld 20%; Non-H Shares: Hong Kong Advance 10%, Deductible in Mainland

Tax Highlights Summary

Investment Channel	Investment Target	Capital Gains Tax	Dividend/Bonus Tax
Hong Kong Connect (沪港通)	Hong Kong Stocks	Exempted (until end of 2027)	H Shares: Deduction of 20%; Non-H Shares: Listing Deduction of 20%, Hong Kong Tax Already Paid Can Be Refunded

Tax Highlights Summary

Important Note: The information above is based on current policies. Tax regulations may change, and investors are advised to consult with a professional tax advisor or monitor the latest information released by the tax authorities before making investment decisions and filing tax returns to ensure compliance. The typical time frame for reporting foreign income is from March 1st to June 30th of the following year.

Premium Whole Life Insurance Policy Interpretation

Wed, 09 Jul 2025 21:13:58 +0800

It’s difficult for ordinary people to understand a policy document, and traditional financial planning is based on understanding annualized returns. However, the calculation method of an increasing term life insurance policy is Internal Rate of Return (IRR), and there’s a difference between these two – what’s the difference and why does it exist?

When funds are invested in one go, Internal Rate of Return (IRR) and Annualized Return (Annualized Return) produce the same results.

Layman’s Explanation

Imagine you planted a tree.

Lump Sum Investment: You invested the money to buy the sapling and the fertilizer for the first year all at once.
Annualized Return: This is like measuring how much your tree grows each year, then calculating the average percentage it grows by per year. It measures how much your money grew on average over one year.
IRR (Internal Rate of Return): The IRR concept is broader and can handle situations with multiple cash inflows and outflows. However, in a simple scenario where you have a single investment and a single return, IRR also seeks to find an “average annual growth rate” that makes the money grow at this percentage over time, exactly equaling the amount you finally receive back. Because in a single investment, single return scenario, there are no intermediate cash flows (like regular dividends or additional investments), the calculation of IRR is simplified into finding a compound annual growth rate, which is exactly what the annualized return expresses.

An Example

Let’s assume you:

Initial Investment: On January 1st, 2024, you invested 10,000 yuan.
Investment Term: 3 years.
Final Return: On January 1st, 2027, you received back 13,310 yuan.

1. Annualized Return:

The formula for calculating annualized return is:

$$\text{Annualized Return} = \left( \frac{\text{Ending Value}}{\text{Beginning Value}} \right)^{\frac{1}{\text{Investment Period}}} - 1$$

Substituting the data:

$$\text{Annualized Return} = \left( \frac{13310}{10000} \right)^{\frac{1}{3}} - 1$$

$$\text{Annualized Return} = (1.331)^{0.3333} - 1$$

$$\text{Annualized Return} = 1.1 - 1 = 0.1 = 10\%$$

Therefore, the annualized return on this investment is 10%. This means your money grew an average of 10% per year.

2. Internal Rate of Return (IRR):

IRR is the discount rate that makes the net present value (NPV) of all cash flows zero. In this example, the cash flows include:

January 1, 2024: -10,000 (Cash outflow – investment)
January 1, 2027: +13,310 (Investment recovery) We need to find a discount rate r such that: $$-10000 + \frac{13310}{(1+r)^3} = 0$$ $$\frac{13310}{(1+r)^3} = 10000$$ $$(1+r)^3 = \frac{13310}{10000} = 1.331$$ $$1+r = (1.331)^{\frac{1}{3}}$$ $$1+r = 1.1$$ $$r = 1.1 - 1 = 0.1 = 10\%$$ Therefore, the internal rate of return (IRR) for this investment is 10%.

Summary

In this simple example of a one-time investment and one-time recovery, you will find that the results of calculating the annualized yield and internal rate of return are identical. This is because in this specific case, the IRR calculation logic is equivalent to the compound interest calculation logic used to determine the annualized yield.

IRR truly comes into play when an investment involves multiple cash flows, such as investing in a fund where you contribute money each month, or investing in a project that pays dividends at different points in time and ultimately recovers a final sum of money. In this complex cash flow pattern, the annualized yield may not accurately measure the true return on investment, while IRR can better reflect the time value of money and the overall rate of return for the investment.

What is a Stablecoin?

Thu, 12 Jun 2025 23:43:19 +0800

Stablecoins have already gained legal status in the United States and Hong Kong. This allows for more efficient capital flows globally, and gray areas are bound to exist if not regulated – similar to how the US manages opioid addiction.

Stablecoins are crypto assets pegged to fiat currencies (such as the US dollar or Hong Kong dollar) or precious metals, designed to maintain their value stability. They are primarily divided into three categories: fiat-backed (such as USDT, USDC), commodity-backed (like stablecoins backed by gold reserves), and algorithmic (which do not rely on physical reserves but instead use algorithms to maintain their peg)([zh.wikipedia.org][1])

🛠️ Why Should Legislation Support Stablecoins?

1. Enhance Payment Efficiency and Reduce Costs

Stablecoins can provide instant, low-cost cross-border payment services, particularly in areas where banks are not covered. Their settlement speed is fast, fees are low, and they offer significant value for international trade and remittances ([ft.com][2]).

2. Strengthening the Internationalization of the US Dollar / Currency

From an American perspective, the rise of stablecoins can increase demand for short-term assets like U.S. Treasuries, thereby solidifying the dollar’s position and simultaneously driving financial innovation. The EU is also taking advantage of this opportunity to accelerate the launch of a digital euro.

3. Addressing Regulatory Gaps and Mitigating Risks

Historically, stablecoins have largely operated in the “shadow financial” system, lacking transparency and plagued by market irregularities, even involving risks such as money laundering and fraud. The U.S. proposed STABLE Act and GENIUS Act require clear regulation, disclosure of reserves, and capital/liquidation rules to ensure financial security and investor protection ([morganlewis.com][3]).

Hong Kong, meanwhile, has begun implementing the “Stablecoins Ordinance” from August 2025, requiring stablecoin issuers to obtain a license from the Hong Kong Monetary Authority (HKMA) and meet standards for reserves, redemptions, and anti-money laundering (AML/CFT), as well as prohibiting unlicensed institutions from advertising promotions ([morganlewis.com][4]).

How Do Stablecoin Companies Make Money?

Interest Income on Reserve Assets For example, Circle’s USDC reserves are largely held in short-term US Treasury bonds, benefiting from current interest rates. In 2023, profits increased significantly, and approximately $5 billion in profit was projected for 2025 (ft.com) . Tether’s report showed earnings of $5.2 billion in the first half of 2024.
Transaction Fees and Developer Tool Revenue In addition to minting/redemption fees, stablecoin platforms generate stable revenue by providing APIs, SDKs, settlement tools, etc., for DeFi, wallets, and corporate clients (marketwatch.com)
Financial Expansion Services Some stablecoin issuers profit through additional products (such as interest redemption, investment features, corporate settlements, etc.), but this may lead to regulatory restrictions on “interest-bearing stablecoins.”

✅ Summary

Stablecoins are payment tools designed to mitigate the volatility of cryptocurrencies, maintaining value through reserves or algorithms.
Regulatory legislation aims to promote compliance, protect consumers, maintain financial stability, and foster innovation and international competitiveness.
Revenue models primarily derive from interest on reserve assets, fees, and value-added services.

Looking ahead, if regulated effectively, stablecoins could play a significant role in global payment systems and compete with Central Bank Digital Currencies (CBDCs).

Balancing Bank Marketing Strategies with the Art of Personal Financial Management

Sun, 31 Mar 2024 01:33:48 +0800

Recently, the renovation project at home has led to a surge in daily expenses. I’ve also been using credit cards, paying them off within the billing cycle, although I have enough cash on hand, I prefer to keep it in money funds to earn some additional interest income. Furthermore, to ensure financial stability, I’ve set up automatic payment functionality so that my credit card bills can be paid promptly upon maturity.

Bank Status: Deposits Increase, Loans Decrease

Amidst increasing economic uncertainty, people are more inclined to save rather than consume or invest. This has led to an increase in bank deposits, but it also means banks have to pay higher interest rates to depositors. Conversely, due to reduced consumer and investment activity, loan demand has decreased, making it difficult for banks to generate interest income through lending.

To attract and retain customers, banks are forced to offer more competitive deposit rates, further compressing the bank’s net interest margin. Simultaneously, in order to stimulate economic growth and consumption, central banks may implement policies of lowering benchmark interest rates, which will also impact bank loan rates and consequently affect their profitability.

Banking Marketing Strategies: Cultivating User Habits

The due date is almost here. First, the Bank of Communications contacted me, offering a one-year free installment payment service with no interest charges. Shortly after, China Merchants Bank also provided installment interest discounts of 2.5% off, equivalent to an annualized interest rate of 1.9%. Faced with these offers, I chose to accept installment services from both banks.

I realized that banks are truly willing to invest heavily in cultivating user habits. According to the bank’s definition of “flow,” I should be a premium customer. In the current context of difficulty for banks in lending and deploying funds, by fostering my installment awareness, the bank is actually preparing for potential liquidity difficulties that may arise from me in the future, at which point they can earn more interest income from me. After all, as we know, interest rates on credit card bill analysis are not low.

Banks use free installment services and low-interest installment offers to not only increase the frequency and amount of credit card usage but also to establish a positive image in the minds of users. This shift in strategy reflects the bank’s rapid response to market changes and its deep understanding of customer needs. In this way, the bank not only solves the problem of difficulty in lending and deploying funds, but also lays the groundwork for future profits – it’s not just about making money today; looking ahead is key to long-term success.

The Importance of Personal Financial Management

Despite the appealing offers of installment financing from banks, as users, we should recognize the risks associated with over-reliance on credit card installments. We should carefully consider our repayment ability and future financial needs to avoid falling into long-term debt traps due to short-term financial convenience. Key to personal financial management is balancing current needs with future planning.

AI Financial Knowledge Base on Uncle Xiang's Notebook

Trading Around the Close: A-Share After-Hours Fixed-Price Trading, MOC, and CAS

First, Break Down the Three “Closing” Concepts

A-Share Expansion: Fixed Price, Not Quantity

U.S. Stock MOC: Accepting the Final Price in the Closing Auction

HK Stock CAS: Not an Order, but a Closing Auction Session

Scale: Unify the Definition First, Then Comparison Becomes Meaningful

Seeing Huge Volume at the Close, First Ask Five Questions

References

Original Prompt

Illegal Cross-border Exhibition Rectification (Part III): Re-evaluating Online Securities Broker Valuation

Internet Brokers are the Most Complete Sample

Not Mentioned Does Not Mean Being in the Safe Zone

More useful than hitting with a single stick by looking at layers

Next, pay closer attention to the implementation details

It won’t stop at just three names

Convergence of Series

References

Author’s Notes

Original Prompt

Illegal Cross-Border Exhibition Rectification (II): The Two-Year Window Most Easily Misinterpreted

That time with the Shanghai Stock Connect program really took almost a year

But we cannot directly apply a full year’s buffer this time

Two-year window, not two years of free buying

What’s most valuable for investors is not guessing dates, but monitoring signals

My Conclusions

References

Writing Notes

Original Prompt

Illegal Cross-border Exhibition Rectification (Part 1): Redrawing the Boundaries of Existing Accounts

2022 is for locking new additions, 2026 is for managing existing stock

Many areas have been clarified, while those yet to be public are also extremely crucial

The “13% Customer Count” Does Not Influence the Estimation

This is not a typical negative factor for fines

My Current Assessment

References

Original Prompts

The prior adjustment (pre-adjustment) for backtesting differs between domestic and international markets.

A-Shares Pre-adjustment: How to Connect the Candlestick Data (The Core Issue)

HK/US Stocks Adjusted Close, First, how to calculate the total return

Writing Approach Summary

Understanding spin-offs and splits in the US stock market can be challenging.

Why is a 1 for 10 Reverse Stock Split Written as “1 for 10”?

Grammatical Habit Comparison

Stock Split Explanation

Summary

Summary

Summary

Hong Kong Stock Exchange Brokerage Fee Liberalization and Market Competition

Key Historical Turning Points: Cancellation of the Minimum Commission Rule in 2003

A Product of Fierce Market Competition

Business Logic and Brokerage Interests

Key Points to Note

- Significant differences in trading and settlement between stocks and digital currencies

Part 1: The Foundation of Traditional Stock Markets – A Chain of Trust Composed of Professional Institutions

The Players

Core Concepts: The “Paperless” and “Non-Moveable” Nature of Securities

Part Two: The Foundation of the Digital Currency Market – A “Trustless” System Built on Code and Cryptography

Core Technology (The Technology)

Core Rules: Consensus Mechanism

Summary and Comparison

Summary and Comparison

Summary and Comparison

Summary and Comparison

Summary and Comparison

Summary and Comparison

Summary and Comparison

Why the concept of “settlement” is necessary in traditional stock trading?

Historical Roots: Originating in the “Paper” Era

Modern Core: An Unreplaceable Risk Management

Counterparty Risk

Clearing & Netting

The Complete Lifecycle of a Stock Transaction

Over-the-Counter (OTC) Clearing and Settlement of Digital Currencies: Unveiling the Mechanisms Behind 7x24 Continuous Trading

Core Difference: From T+2 to Real-Time Settlement

Blockchain: A Natural Real-Time Full Settlement System

Centralized vs. Decentralized Exchanges: Different Clearing and Settlement Pathways

Centralized Exchanges (CEX): Internal Clearing + On-Chain Settlement

Decentralized Exchanges (DEXs): On-Chain Atomic Swaps

Summary: The New Paradigm for Digital Currency Clearing and Settlement