The Research Of Market Maker System In The National Equities Exchange And Quotations In China

National Equities Exchange and Quotations(NEEQ)is a national securities exchange authorized by the state council.Incorporated on 20 th September,2012 and known in Chinese as "the new third board",the National Equities Exchange and Quotations(NEEQ)is China's newest stock market.It's an alternative to the Shenzhen and Shanghai stock exchanges,primarily for advanced production and technology companies,but not limited to such.NEEQ is an over-the-counter(OTC)market that provides greater financing opportunities for small companies because the requirement for listing is lower than on the Shenzhen and Shanghai exchanges.Capital market is a hierarchical system composed of the floor trading market and the OTC(Over the Counter)market.The two are coordinated together to form an organism.Now the basic configuration that China floor trading market slumps,the OTC market lags and the two markets develop unequally badly needs to adjustment and amendment.The establishment of NEEQ early in 2013,as an important measure to make up for the lag of the OTC market,is an important milestone in the process of the OTC market system construction,and an important part of the construction of multi-layer capital market and even socialist market economy with Chinese characteristics.There are more than 1200 small and medium-sized enterprises in China,less than 2% of which can get the bank loans,and less than one in ten thousand can list on the main board.However,small and medium-sized enterprises are the most dynamic and the most promising economic cells of China's economy.Funding shortage has become the shackle hindering the innovation and development of small and medium-sized enterprises.The design and layout of the "new third board" market system give adequate consideration in the conditions of such enterprises.Settled in Beijing Financial Street,the "new three board" will become an important component of the multi-layer capital market in China.Compared with the main board market,the "new third board" market has a larger market space and capacity.Up to 25 th March,2016,6238 enterprises have listed on the "new third board".It is estimated that,in the next five years,the number of listed companies on the "new third board" listed companies will break through 10,000,the total market capitalization exceed 1 trillion yuan,and annual trading volume reach 400 billion yuan.Exchange market has an unparalleled ability to absorb social funds.With the help of the Internet platform,such market will be everywhere,ever-present,greatly improving the accumulation and allocation efficiency of information,funds,talents,agencies and other factors of production.The "new third market" is a direct financing market.Small and medium-sized companies choose equity financing to symmetrize risk and return.These companies have high risk of growth and if they collapse early,the creditor is not able to earn from them,and if they grow smoothly,the creditor should benefit more than the fixed interest from these companies.It is considered that the best way of financing of small and medium-sized companies is internal financing,and then equity financing and debt financing.Market microstructure theory is one of the most rapidly developing financial branches in recent years.The research of the market microstructure can broaden our understanding of the market micro-operation.The existing research results show that the performance of the market microstructure can influence not only financial market quality directly,but also the liquidity,stability,efficiency and market transparency.The research of the market microstructure also plays a guiding role on policy making.It has a certain practical significance.Therefore,the research of the OTC market microstructure and market makers can broaden the research of market microstructure theory to the field of the emerging markets.Moreover,it can provide theoretical basis for the choice and optimization of market trading mechanism by guiding policy-making.The previous studies focus more on the stock market than the OTC market.The study of the OTC market microstructure and market-maker system is still in absence.The purpose of this research is to fill this gap.At the same time,the author tries to provide feasible solution to small and medium-sized enterprise financing difficulties,starting the innovation "engine" of such enterprises to promote the comprehensive national strength take-off.This article mainly studies the "new three board" market of the mainland China area.The research methods of this article follow normal discussion pattern that's from generality to specialty(from financial markets to the over-the-counter securities market),from abstraction to concreteness(from the market microstructure theory to the practice in the mainland),from the normative analysis to the empirical analysis(from " what is " the OTC securities market to "how to" apply the market maker system).The methods contain the application of logical deduction,the law of behavioral finance,international comparative method,historical induction,economic law,and other research tools,in order to demonstrate from different aspects.It will focus on solving the following four problems.Firstly,argue whether the market-maker system is the best choice through the analysis of trading mechanism of the over-the-counter securities market in mainland China.Secondly,embarking from the market microstructure theory,argue the functioning mechanism of the market-maker system of the OTC securities market and its influence on the market's efficiency,liquidity and stability.Thirdly,analyze the reason that market maker system is in a dominant position through a comparison of worldwide OTC securities markets,then conclude applicable experience for the OTC securities market in mainland China.Lastly,establish the specific operational flow of the market maker system and put forward the problems in the market maker system operation that might need attention.The author will make a deep research by treating these problems as logical clues.The main contents of this paper are as follows.First of all,under the theoretical framework of the microscopic structure,the paper summarizes the trading mechanism of financial markets,particularly contrasts the market maker system with the bidding system.In this paper,the author use inventory model and information model which are two main microstructure theories to analyze the function route of the trading mechanism path in financial markets,and lay a foundation for the analysis of the OTC securities market.Furthermore,the paper studies general characteristics of the microstructure in the OTC securities market and the unique features in the mainland OTC securities market.Secondly,the market maker system has been fully developed in many countries and plays a pivotal role in the OTC securities market.Therefore,the paper chooses the OTC securities markets of United States,Taiwan,United Kingdom,France as samples to conduct a detailed study and analysis.Among those areas,we mainly focus on the United States and Taiwan.The United States has formed a multi-level capital financing system including NASDAQ,the OTCBB and Pink Sheets,which provides some distinct ideas for the development of the OTC securities market in China.The changing prosperity of different market layers of the American OTC market is the true account of the system design.Due to the most similar humanistic background between Taiwan and mainland,Taiwan OTC market has a high reference value.After personally inspecting the OTC market in Taiwan,the author found that the experience and lessons of Taiwan OTC market could be learned to develop the mainland OTC securities market.By studying the major OTC markets in the world,we found that the market maker system had played its role as a core trading mechanism.Then,beginning with the actual situation in China,this paper combs the development history,present situation and the existing problems of the mainland OTC securities market.Next,the paper emphatically introduces the development process of the OTC market and analyzes the causes of the failure.And on this basis,we draw a conclusion that immature subjective and objective conditions is the main reason causing the failure of the mainland the OTC market.And then,this article gives a detailed analysis to STAQ,which both have the prototype of the OTC market,and mainly dues their failure to these reasons: market mechanism was imperfect at the period from planned economy to market economy;the SATQ had a deformed development as they were established mainly to solve the problems of the transformation of state-owned enterprises;the securities market was short of legal system,even the opening and closing of the market was random;the lag and non-popularization of information technology largely restricted the function of market makers.Combined with failure cases of the OTC market in the history,this paper continues to introduce the policies and measures for the development of the OTC market in our country after the 21 ct,derives the future situation of the new three board market,demonstrates the development condition of market maker system,and further analyses how the market maker's behaviors can affect the OTC securities market.To measure the microscopic quality of the financial market there are five standards: liquidity,transparency,effectiveness,transaction cost and stability.As a trading mechanism,the market maker system will have a certain impact on the quality of financial market microstructure.This paper finds that the market maker system will improve the efficiency,liquidity,stability of securities market,and reduce the transaction cost.But the relationship between the market maker system and the transparency of securities market is not completely positive correlation.At the same time,this paper also realized the market maker system is not a panacea;its advantage is conditional and limited.And the market maker system itself also has all sorts of drawbacks.Therefore,after pointing out the shortcomings of the market maker system,the paper clearly puts forward the supervision idea and supervision goal,and points out the direction for the supervision of the market maker system.Lastly,it is realized that single index is not able to reflect liquidity by empirical method.Market making can promote the liquidity of the market more than negotiating transfer.And frequency of trade is not a guarantee of high profit.In conclusion,market-maker system has a positive impact on the operating efficiency of the "new third market".The article gains a series of conclusions,among which the most important one is that the market maker system is necessary and flexible in the mainland OTC securities market so that the "new three board" market should take this system as its core mechanism.In addition,there are some following conclusions: a competitive market maker system is more efficient and decreases the research cost of trading in the OTC securities market;market maker system can increase the liquidity,validity and stability of the OTC securities market;the "new three board" market helps to find the real value of small and micro businesses and also plays a role as an important financing platform for them.The optimal decision is to change the next spread,rather than to find a best model according to the result of historical transaction to guide subsequent quotations.The modern information technology greatly influences the efficiency of the "new three board" market and market makers.The innovation of this article is that the study on market maker system of the "new three board" market greatly makes up for the vacancy in this aspect in mainland China.The research on the microstructure of the mainland OTC securities market extends the microstructure theory,and provides a new research angle and new solutions.Through on-the-spot investigation in Taiwan OTC securities market,the author got a lot of first-hand information,experience and lessons which are helpful for the practice of the mainland area.The practical research on automated trading,from pure theoretical level,focuses on its microscopic structure,providing a new research idea and specific focus on the improvement of the "new three board" market.Now,all aspects of the NEEQ are still premature after two years' operation.So the author hopes that this research could be helpful to the development of the NEEQ.With the further maturity of the market maker system in the "new three board" market,more data can be obtained to certify and expand the author's proposition and research,which also is the author's future research direction.Finally,the article puts forward some policy suggestions,aiming to guild practice by studying relevant theories.The suggestions are as follows: ease the entrance restrictions and improve the rotating system;establish a reasonable system of information disclosure;establish the block trade system;strengthen market maker's function and ability in market pricing;remove the charge of market makers;enlarge the strength of research on market maker trading rules;the legal status of the "new three board" market and market maker system should be specified.