Chapter 26: Yes or No?

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The next morning, Zhou Yun came to the Office of the Securities Regulatory Commissioner again.

This matter had to be dealt with sooner or later. He was not satisfied with the model’s current performance, and no matter what, the model would eventually become more capable. It was only a question of when. If no one invested in it, that day would come later; if someone did, it would come sooner.

Whether sooner or later, its impact would undoubtedly be far greater by then. It was better to address the hidden risks now. Since they had asked him to come, they must already have a solution in mind.

Dressed in a gray T-shirt and gray shorts, Zhou Yun stood out sharply among the crowd in white shirts and black trousers.

At the reception desk, he said, “Hello. Director Li asked me to come.”

The receptionist, wearing black-rimmed glasses, lowered her eyes to check the records, then put on a professional smile. “Are you Mr. Zhou Yun?”

“I am.”

“Of course. Please go upstairs. Office 201 is on the left. Director Li is waiting for you.” She raised a hand toward the stairwell.

The office door was ajar. Zhou Yun knocked twice.

“Come in.”

A thin man in his early forties rose from his seat and extended his hand. “Hello, I’m Li Mo. You must be Mr. Zhou Yun. Such a young man, and already so accomplished!”

“Please, have a seat.” Li Mo gestured for Zhou Yun to sit down. “Thank you very much for coming.”

“It was only right.”

“Then let us get straight to the point.” Li Mo opened the documents on his desk. “We have discussed your situation before. There is no problem whatsoever with your ordinary business activities. Our concern is this: if your model were adopted by several major institutions, could it disrupt the market? This is extremely important.

“We conducted some tests. If five institutions adopted your model, there is a strong possibility that liquidity during the final three minutes of trading would plummet. That would mean most people would have difficulty trading at normal prices. Under extreme circumstances, it could even trigger panic selling at the opening of the following day.

“Although your model currently appears to be applicable only to gold ETFs, we must exercise caution regarding anything that could have a major impact on the market. I hope you can understand.”

Li Mo’s tone remained gentle throughout. There was no hint of reproach.

“I’m sorry. I didn’t think things through at the beginning.”

“I completely understand. Even someone who has not worked in this industry for many years might never recognize the danger. In truth, your model is remarkably powerful. But the financial market is like an ecosystem: any predator that becomes too successful will upset the balance.

“One important reason your model performs so well is that it is new. No one else in the market is using a similar approach.”

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“But the only unchanging rule in the financial markets is that every rule will eventually be discovered and exploited by clever people, until it ceases to work.

“Before that rule becomes ineffective, however, it may cause enormous distortions in the market.”

Li Mo repeatedly emphasized the danger because he wanted Zhou Yun to understand the consequences and the stakes.

The room fell silent for a brief moment.

“What do you want me to do?” Zhou Yun asked. For the moment, he could think of no good solution—unless he abandoned the research altogether.

Li Mo breathed a sigh of relief. It seemed that Zhou Yun had taken his words to heart.

His greatest fear had been that Zhou Yun would refuse to listen. If that happened, he would truly have no way to deal with the situation. After all, Zhou Yun’s model had not yet caused any serious consequences.

“We are merely a regulatory institution. Before you actually cause serious consequences, we will not—and cannot—take any measures against you. All we can do is offer a few suggestions:

“First, do not sell or license your model to any institution.

“Second, reduce the performance of your model to an appropriate level.

“Third, join our expert advisory group.

“Fourth, cooperate with a state-owned enterprise. Your model would then be prohibited from being used domestically.

“All four options may harm your interests. If you have any other ideas, we can discuss them.”

Zhou Yun would not consider the first three. As for the fourth, however, there seemed to be more behind it than met the eye.

“Tell me more about the fourth option. I’m quite interested.”

“Haha!” Li Mo laughed heartily. “Mr. Zhou truly is young and accomplished. As a matter of fact, I also thought the last option was the one you were most likely to choose.

“However, this last matter will not be negotiated by us.”

Li Mo rose, walked over to the desk, and made a call. “You can send him in.”

A moment later, the door opened, and a middle-aged man in a dark navy suit entered. His hair was combed back with meticulous precision, and he carried a black briefcase.

“This is Director Zhao from Huijin’s Investment Department,” Li Mo introduced him. “Director Zhao, this is Zhou Yun, whom I mentioned to you.”

“Mr. Zhou, a pleasure to meet you! We have already tested your model’s data internally. Its results are simply astonishing!”

Zhou Yun noticed that Director Zhao’s handshake was firm and steady. Clearly, he was an experienced man who often dealt with people.

After the three of them sat down again, Director Zhao took a document from his briefcase.

“I’ll be frank. We have great confidence in you and hope to reach a cooperation agreement.”

He opened the document and pointed to the sections highlighted in red.

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“First, Huijin will invest five hundred million yuan in the further development of the model. Naturally, the entire sum will not be provided all at once. We will need a period of evaluation.

“Second, your team will continue to operate independently, but Huijin will hold the majority of the shares.

“Third, the model may be used only for trading in overseas markets.

“Of course, this cooperation will not be carried out through Huijin’s parent company. Under the relevant regulations, we cannot invest directly in private entities or individuals. Therefore, the investment will come from one of our subsidiary companies.

“You can rest assured, however. I will still be the one negotiating with you, and not a single penny will be missing.”

Zhou Yun raised an eyebrow. The terms were extraordinarily favorable. They had clearly come fully prepared. As for the restrictions, he could understand them. State-owned capital inevitably came with certain constraints.

“Overseas markets?” Although he had already guessed at the reason, he still wanted confirmation.

Director Zhao exchanged a glance with Li Mo.

Li Mo cleared his throat. “Well... the country is currently encouraging financial technology companies to expand overseas, and besides...” He lowered his voice. “The overseas markets have better liquidity and are more suitable for your model to perform.”

Zhou Yun nodded. He understood.

Just as he had thought, the subtext was: causing trouble in foreign markets was preferable to causing trouble at home.

“I have no problem with the terms, but regarding the equity structure, I want absolute control.”

Director Zhao shook his head. “I understand your concern, but I’m afraid that is impossible. You know what stands behind us. If your model truly reaches the standards we expect, we must retain control over the key decisions.”

The room fell silent once more.

Zhou Yun wanted absolute control because he was afraid that investors might interfere with his research. But the situation had changed. His potential investor was state-owned capital. If he accepted the investment, absolute control would be completely out of the question.

Should he accept?

Or refuse?

He hesitated.