The Research On The Effect Of Market Maker System On The Liquidity On Inter-bank Bond Market

Inter-bank bond market was established in 1997, after years of fast developing it has become the main place for issuing and trading bonds. Inter-bank bond market is very important in the economic system, it is the channel to place fiscal policy and monetary policy. Market-maker system is the major trading system at bond market in the world. Market maker plays a important role because it offers open consecutive and competitive quote. It buys bonds at the bid price and also sell bonds at ask price, so the market maker connects buyer and seller and improve the liquidity of the bond market. Inter-bank bond market officially introduced market maker system in 2001.In recent years the People bank of china admitted the market makers sat on the heart of the inter-bond market. Liquidity is known as the foundation of market efficiency and the lifeblood of financial markets. For inter-bank bond market, liquidity is the important influence factor of bond management and macro-control. Enhance the inter-bank bond market liquidity,it will help to increase the amount of information reflected in bond prices, and will improve the bond market's function of price discovery; it will reduce risks in the treasury bond management, and raise the efficiency of debt management to reduce the financing costs; it will provide guidance about pricing for other high-risk financial products so as to help the market improve its risk management techniques.This article discusses the following aspects. First chapter introduced the purpose of this article, the studying situating at home and abroad, the significance and methods of the study. Second chapter introduces the history and development of china bond market, the theory of market maker and the contrast of the market maker system of other countries. Third chapter discusses the methods of measuring bond market's liquidity, summed up the different factors which influence the liquidity and then calculate the liquidity of the whole bond market, the liquidity of different kinds of bonds and the liquidity of different bond markets. Fourth chapter makes an analysis of the impact of market maker system to the liquidity of the inter-bank bond market. Last chapter draws the conclusion of the article, makes recommendations to improve the market maker system and the liquidity of the inter-bank bond market.This article has two aspect innovations. The first is theory innovation. This article is based on the bond theory and liquidity theory, making research of the influence of liquidity of market maker system in the inter-bank bond market; while few scholars have research this area. The second is content innovation. The article analyses the inter-bank bond market's overall liquidity, different kinds of bonds and different market's liquidity.