Research On Market Microstructure With System Theory

Market microstructure is newly developed during these twenty years, which mainly studies on mechanism of security market's influence on market efficiency and quality and benefits market design very much. With more than ten years development, our security market has fairly large scale and begins to impact on economy. But compared to western market, there still exist much shortcoming in our security market, such as lack of short sale and so on, which results that it can't make full use of the market. It is necessary to improve the structure of security market.As the complexity of financial system, parameters usually show complex characteristics such as nonlinearity, unbalance and dynamic, and need to be studied by the composite method of quality and quantity. The thesis analyzes the relationship of the whole market microstructure's factors by the method of systematical dynamics. Then it gets the degree of parts of factors' relationship with the help of linear regression, and discusses about the market design.Firstly, the paper introduces the structure of security market, some basic principles and latest related researches. Secondly, it takes some international typical mechanism of security market for example and deduces useful experience for Chinese market. Thirdly, it analyses the actuality and problems of Chinese security market, and gives some suggestion about the orientation of reform.The paper then reveals the internal structure and the environment of security market in China from the perspective of system theory, studies the relation of supply, demand and price formation. It helps to learn market design clearly very much. Finally, it draws charts about the feedback flow on the basis of the structure and environment of the market's operation with Vensim 5.6a, and analyses the goals and principles of market design.According to the above analysis, the paper makes conclusion that market design can be worked out from three aspects as the instruction of market environment, the relationship of goals and optimization of respective factors.It is very innovative to combine system theory, the methods of systematical dynamics and econometrics, researches on the whole system and environment and give advice to optimize the market design.