The Third Board Market Trading Mechanism

In order to solve the problem of the share transferring which was closed on the STAQ and NET systems, SAC (The Securities Association of China) issued a decree on 12, June, 2001-----"Qualified stock dealers try to transfer share by rent a system". Soon afterwards, some companies (PT) which shares were stopped on the stock exchange also put their share trading on this system. From the law and administration regulations we could find this system is a service that is executed by qualified dealers permitted by SAC, these dealers rent a trade platform of the stock exchange, so this has the feather of OTC market, it is the beginning symbol of "The Third Market" in China.The object of study is "Third Market", which is the main part of future OTC market in China, although "Qualified stock dealers transfer system" is only a embryonic form. The future "The Second Market" is also belonged to OTC market, NASDAQ is a good example. The definition of "Third Market" is that trade not on the stock exchange and "The Second Market". To develop and standard this market is very important in china.The objective of study is design a trade mechanism to improve market "Third Market" efficiency. How to design a trade mechanism (include price mechanism) to overcome the information asymmetry has become a key problem in finance market. A trade mechanism designing include: trade object and scope, select a trade system, inspection mechanism, the standard of go on market, trade regulation, etc. In order to get the aim of fostering the "Third Market" becoming a real OTC market in China, the first task is to select and design a trade mechanism suit for the situation in china. This has become a hot problem of big dealers, small enterprises, investors and inspectors.First, we study the OTC market with theory of Market microstructure theory because the mainly difference between the stock exchange and OTC market is the trade mechanism. Some developed countries have formed a mature operation system, so we can learn some experience from introduce these countries OTC market trade mechanism, analyze the function and role of OTC market. In the study we find the same feature in OTC market: market-maker trade mechanism, standard of go on market is not strict than the stock exchange, but the information disclosure is more strict trade mechanism trade mechanism. It is a auction system (continue and call market) on stock exchange, and it is the single call market on "Third Market".Second, we study the relationship of Market microstructure, trade mechanism and market efficiency. According to the price form mechanism we divided three kinds of markets: market-maker market, auction market and hybrid market. From study we find that different trade mechanism has its special advantage and disadvantage, so selecting and reform trade mechanism is the main way to improve market efficiency.Third, we analyze the "Third Market" by test six standards of judging market efficiency (in fact, we only test five of them, as safety is related to the technical and equipment). By study we find the "Third Market" is more volatility and inefficient than stock exchange, the liquidity is serious shortage, it still has not a efficient information disclosure system and trade cost is also high. All these question need to solve by reform a trade mechanism.Last, by the complete and overall study and analyze, we put forward a series policy proposals: betterment price mechanism, set up a special inspection model and market stable methods, form standard of go on market, foster investor, etc.