Chapter 2391: Financing (Part 26)
Cheng Dong found this troubling. If things proceeded this way, what was the point of the Guangzhou Exchange? Wouldn't all transactions simply be absorbed by the black market? He said, "If that's the case, it won't be good for the Guangzhou Exchange's development."
Murmurs rippled through the finance sector crowd in the meeting hall. Ren Youzi hurried to explain:
"Everyone can rest assured. We have no intention of letting black market trading run rampant. Initially, we'll set up teahouses around the exchange to provide venues for traders to negotiate and aggregate information. We'll draw them toward the Guangzhou Exchange from the very start. By the third public offering, we'll transition to registered stock. Dividend distribution will be based on registration, and trade transfers must be conducted at the exchange. Additionally, we suggest minimizing stamp duty and transfer fees initially to cultivate the habit of trading at the exchange."
Meng Xian expressed confusion. "Then why are the first and second phases bearer shares? Wouldn't it be better to standardize transfers through formal institutions from the beginning?"
Chu He nearly laughed aloud. Formal institutions—he's one step shy of saying Delong Bank outright. Looks like Meng Xian not only wants to pocket issuance fees but also has designs on transaction fees. He's practically treating himself as a securities broker.
Of course, securities brokers would certainly exist in the future, but this brokerage business couldn't be handed to Delong alone. At most, Delong would be one shareholder among many.
Before he could speak, Ren Youzi stepped in with a vague deflection. "We can study this further. I think the first two phases aren't large in volume. Either approach won't have much impact."
"You needn't worry about stamp duty," Ai Zhixin said leisurely, his attitude calm. "At this stage, we're not counting on the securities market to support finances through taxes and fees. Our position is this: stamp duty on securities trading should exist, but collection will be temporarily suspended, with a buffer period of several years. The goal is to provide good service, release water to nurture the fish, establish the framework first, and resume collection when market adjustment becomes necessary. Also, I think the Guangzhou Exchange should first focus on being a trading intermediary and registration office. When parties negotiate transactions, we serve as witnesses and collect a brokerage fee. A 0.3% or 0.2% fee is simply a handling charge, isn't it?"
Cheng Dong expressed agreement. "I also support Director Ai's thinking. However, since there are no securities brokers at this stage, we don't need to collect transaction handling fees. In the future, if business expands to other regions, it won't be too late to collect when trading through Delong. The exchange should initially only handle trade intermediation and registration transfers. Let's start with a 0.2% intermediary fee and see how it goes. As for registration fees—one yuan each time, with account opening fees calculated separately. Just have your Nanyang Company conduct the market maker business off-exchange. We'll cooperate by publishing guidance prices. When the third issuance comes, then we'll establish the complete system for commissioned quotes, matched transactions, and so on. What does everyone think?"
Hearing this, Chu He thought Cheng Dong's plan was excellent. First, it gave the Guangzhou Exchange preparation time to establish trading systems without delaying the Nanyang Company's first and second phase financing. Second, it separated the Guangzhou Exchange from the riskiest part of the entire financing scheme—the stock price manipulation—so that if problems arose, the Nanyang Company would bear primary responsibility.
No matter what happened, problems couldn't be directly traced back to the Senate's official channels.
Zhou Wei surveyed all the Senators' attitudes, which were now clear to him. He said, "This thinking is sound. The Nanyang Company supports proceeding according to this plan. I suggest we immediately begin stock issuance to individual Senators while also spreading the word to prepare public opinion for the next phase's first bond issuance to natives. Senator Meng, Senator Ding—what do you think?"
Meng Xian immediately said, "No problem. Serving the Senate is Delong's duty. It's just this underwriting fee issue..."
Zhou Wei smiled stiffly. "Ah... we can discuss that."
Chu He was in excellent spirits these days. The Nanyang Company financing case had been officially approved, and along with it, the proposal to establish the Guangzhou Securities Exchange. Based on the current situation, he and Ren Youzi would very likely be responsible for this work. Just the day before, Cheng Dong had privately spoken with him, inquiring about his views and suggestions on the project. It was practically a certainty that he and Old Ren would be assigned to this project.
However, according to Cheng Dong's plan, although the securities exchange would have dedicated personnel in charge, they would also need to take on additional finance sector work—in fact, for quite some time, this side work would constitute their main responsibilities. Old Ren would continue his auditing work—he was soon to be promoted to director of the "Cheka" Guangzhou branch. As for Chu He's own work, though not officially announced, Cheng Dong had told him clearly: the paperwork had already been processed through the Organization Department to transfer his affiliation from the education department back to the finance department.
"...As for your specific side assignment, we still need to discuss it. Of course, you can also propose your own preferences. Currently, both the Central Reserve Bank and Delong urgently need professional Senator cadres like you..."
"I'll follow the leadership's arrangements," Chu He immediately stated. "Specific assignments can be made based on my expertise."
"Good." Cheng Dong didn't specify what work would be arranged. "Since that's settled, wait for the Organization Department's notification. As for your exchange's specific work arrangements, you and Old Ren can coordinate among yourselves. For the exchange's location—Liu Xiang's recommendation is to place it at the Great World. After all, our customers are mainly Guangzhou citizens."
With matters basically settled, Chu He decided there was no time to waste. He should first speak with Ren Youzi, share their thoughts on the exchange's future work. After all, they would be partners from now on. A good collaborative relationship needed to be established.
He immediately sent Little Piao to find Senator Ren, but unexpectedly, Senator Ren came looking for him first.
"Chu He!" Ren Youzi also had the appearance of someone whose "spirits are lifted by happy events." The face that had always been overcast—making various Senators and naturalized cadres cringe at the sight—actually bore a smile.
"Old Ren! I was just about to send someone to find you..."
"Don't bother, I have something to discuss with you too." Ren Youzi sat down heavily by the small conference table and pulled a document from his briefcase.
"Take a look. This is the basic charter and structure I drafted for the Guangzhou Securities Exchange. It's fairly simple. Look it over and give me your thoughts."
Chu He opened it and saw the beginning was standard bureaucratic boilerplate:
"To resolve the contradiction between capital supply and demand and liquidity, a securities market will naturally emerge. The securities exchange will solve the matching problem of fundraising and investment through securities issuance and trading, thereby resolving contradictions between capital supply and demand and capital structure adjustment issues. The Guangzhou Securities Exchange, as a profit-making corporatized tangible centralized trading market, starting from actual conditions, will integrate functions of registration and settlement, issuance approval, trade organization, and self-regulation, committed to providing capital market services for various enterprises..."
Did you just take an old document and replace a few words? Chu He silently complained.
He continued reading. Below were five major functions listed: standardized governance, stock transfer, value discovery, direct financing, and credit enhancement. The specific wording was mostly boilerplate—nothing new. Chu He skimmed through quickly.
More important was the exchange setup that followed:
"...The exchange has 17 internal departments, namely: Board of Directors Office, Supervisory Board Office, Discipline Inspection Office, General Office, Trading Department, Settlement Department, Surveillance Department, Legal Department, Issuance Department, Registration Department (preparatory), Finance Department, Internal Audit Department, Human Resources Department, Equity Business Department, Debt Business Department, Innovation Business Department (preparatory), and Administrative Center..."
I wonder if Cheng Dong has told him that this newly established securities exchange only has the two of us as 'full-time' staff. Chu He thought the configuration was ridiculously luxurious.
Complaints aside, the setup itself was methodical, properly structured step by step. It's just that there was no possibility of implementation at present—it could only count as a "long-term plan."
Next came the conditions for listing on the securities exchange—six items total, no different from the old spacetime. Then came the listing process, which Chu He was more concerned about since this was the work to be done immediately.
"...Sponsor securities firm prepares materials and submits to the issuance review committee for review - after approval, receive approval document - disclose prospectus - public inquiry - disclose issuance announcement - pricing issuance - collect funds, arrival processing, share registration, apply for listing - listing committee review - disclose listing announcement - listing. All investors who successfully purchase stocks will receive physical stock certificates on the listing day (refer to paper currency printing and anti-counterfeiting standards)..."
"Old Ren, your plan is excellent, very professional!" Chu He first offered full affirmation, then, predictably, came the "but..."
"Hey, hey, hey, you don't need to say it. I understand what you mean. This plan is empty talk, right?"
"No, no, don't put labels on yourself." Chu He thought this smooth operator wouldn't be easy to handle.
"I know what you mean," Ren Youzi said. "It's just that we don't have these conditions right now. Don't worry—I'm not saying this plan needs to be implemented immediately. That's obviously impossible."
"That's good, that's good." Chu He nodded repeatedly.
Ren Youzi continued, "What exchanges really solve is the pricing problem. The actual fundraising operation is still conducted off-exchange. The earliest exchanges were taverns and coffee houses, or gathering spots under big trees—just places for negotiating business. Ancient China had similar trading customs too: buying and selling bulk goods and livestock, most business was discussed in teahouses. Stocks, bonds—these things sound fancy, but essentially there's not much difference. So we don't need to apply old spacetime exchange models to the present. The Senate doesn't need an exchange with such complex functions at all."
Chu He thought: Your plan and what you're saying are two completely different things! After all that, you just plan to create a "long-term plan"?
(End of Chapter)