Research On The Influnence Of Trading Regulations To China's Stock Market Liquidity

At present,China is in the historical intersection period of realizing the “two centenary”goals.Meanwhile,China has entered the “new normal of economy” and is facing a complex and severe financial risk situation.A stable financial market can provide a fulcrum for China's sustained economic growth and is indispensable for promoting China's high-quality development.As an important part of China's multi-level capital market system,the stock market plays an important role in the whole financial system.Previous global stock disasters have shown that the decline of stock price leads to the sharp shrinkage of market turnover and the depletion of stock market liquidity,which not only further aggravates the risk of stock market,but also has ripple effect on banks,bonds,futures and other financial markets.A large number of effective transactions of stock market participants,that is,the liquidity of the stock market,is the basic premise of the existence of the stock market.The uncertainty of the stock market liquidity level fluctuation,that is,the liquidity risk of the stock market,is the core factor inducing financial risk.Therefore,liquidity risk may lead to financial market risk,or even financial crisis.In order to maintain the stability of the stock market and prevent the liquidity risk of the stock market,China's securities regulatory authorities have formulated and implemented a series of trading systems in China's A-share market,such as margin trading system,price limit system and “T + 1” trading system.With the acceleration of the construction of multilevel capital market and the continuous deepening of institutional innovation,the microstructure of China's stock market has undergone lots of changes,and the liquidity and potential liquidity risk of the stock market also presents new characteristics.However,different from foreign markets,China's stock market has distinct characteristics of order driven.Due to the late establishment of China's stock market,research on liquidity based on China's stock market is still relatively scarce.Although the existing literature has qualitatively discussed the liquidity issues of China's stock market,more accurate and scientific quantitative research is still relatively lacking.In particular,the quantitative research on the impact of relevant trading systems on liquidity and liquidity risk in China's stock market is rare,which is difficult to provide a strong empirical reference and basis for avoiding extreme liquidity risk by improving the trading system design.Based on the reality and academic background mentioned above,this paper combs the relevant literature of stock market liquidity and liquidity risk,and explains the mechanism of China's stock market basic trading system affecting stock market liquidity according to the relevant theories of stock market trading system and liquidity.Furthermore,this paper constructs the liquidity measurement model and liquidity risk measurement model to measure the liquidity and risk status of China's stock market.Then,based on the above measurement results,using the propensity score matching method,difference-in-difference method and other econometric analysis methods,this paper empirically examines the impact of China's three major stock market stability systems on China's stock market liquidity and liquidity risk.The main conclusions of this paper are as follows.First,margin trading affects market liquidity by regulating the supply and demand of the market;the limit system of the fluctuation range can not only avoid the abnormal fluctuation of stock price,promote the stability of the market,but also lead to liquidity spillover effect;the “T + 1” trading system will limit the level of market liquidity and reduce the risk of market liquidity.Second,the initial implementation of margin trading system does increase the liquidity of the stock market.However,in the expansion stage of margin trading,margin trading system reduces the liquidity level of the market,which has a significant crowding out effect.Third,under the price limit system,the liquidity risk of individual stocks increases with the increase of market liquidity risk.In the falling limit state,the market liquidity risk will aggravate the liquidity risk of individual stocks,forming the spiral effect of liquidity risk.Fourth,the “T+1”trading system significantly reduces the liquidity level of a shares on the day,and effectively reduces and controls the liquidity resonance risk between individual shares and markets in A-share market.This paper not only provides a new support for the stability of China's financial risk from the perspective of liquidity,but also empirically and quantitatively analyzes the heterogeneous impact of different stock market stability systems on China's stock market liquidity,which has important policy implications for further improving China's stock market stability system and preventing and resolving financial risks.By controlling the leverage ratio of margin trading credit account,implementing the system of limiting the rise and fall of individual stocks by sector,and the “T + 0” trading system of smooth reversal,we can further improve the trading system design and trading system of China's stock market,reduce the liquidity risk of China's stock market,and provide a more stable and stable platform for the high-quality development of China's economy healthy financial markets.