On OTC Market

Like most other developing capital markets, capital markets in China evolved progressively through learning from developed capital market experiences and system while continuously adapting to its own political and economical infrastructure. At the same time when Shengzhen and Shanghai exchange market grew rapidly, the evolution of capital markets, the diversity of investors' needs, the cycle of corporation development all call for a multilayered structure to set up, causing the attentions from administration and market participants after the decades of progress in China's securities market.Within the framework of multilayered capital market, this article will address the issues regarding how to establish an independent OTC (over the counter) market for nonpublic equity, providing a comprehensive study on this topic. The author argued that, as part of national OTC market, the OTC market for nonpublic equity should be set up in accordance with oversea matured OTC market experiences, combining practical considerations in China's local market conditions, in order to create a channel for small-to-mid cap enterprises to raise capital and promote themselves to a more extensive network of investors. Meanwhile, it also will introduce those dynamic small-to-mid cap enterprises to a better corporate governance structure. Through the shareholders structure changes, they will evolve into well-managed public companies, and become the candidates of future public offering of equity on stock exchangesThis article conducted a comparison study on segmentation of capital markets between various oversea markets, detailing nonpublic equity OTC markets from background, current situation and exiting problems. In the end, this article is intended to discuss fully the importance of developing OTC market to establish the multilayered capital market structure, and provide market administration framework design and future improvements in terms of system, infrastructure and management.