Research Into The Legal Issues Concerning Supervision On The Otc Market

The stock market is an important part of the national economy. It usually includes both floor trading market and the over-the-counter market(OTC), and early securities market originated in the over-the-counter trading. The cooperation of floor trading market and over-the-counter market forms the multi-level capital market system in a country.The OTC market usually refers to trading places where stocks trade via a dealer network as opposed to on a centralized exchange.As a basic level of capital market, it mainly helps innovative small and medium-sized enterprises in the early stage of development to solve such problems as fund raising and equity transactions of venture investment. With its scattered and open operation mode as well as the great variety of security trading, the OTC market is quite different from securities exchange in their modes and management of transactions. Supervision gets essential in the over-the-counter market. because of the existence of the securities market failures and the systematic and non-systemic risk factors different from those of floor trading market. The OTC market supervision generally refers to regulation and supervision by specialized government agencies and other organizations. The OTC market supervision system is essential to make OTC transactions open, just and fair. The supervision can better protect the interest of investors in OTC transactions, reduce its high risk, and promote its healthy development. For the OTC market in our country in particular, it is important to set regulatory ideas different from the main board market and construct a comprehensive supervision system to achieve dynamic balance of regulation and development in the OTC market.During the developing process of the OTC market in developed countries, each country has established a supervision system accordant with characteristics of the capital market of the country to ensure the long-term development of the market, and their government institutions and OTC related organizations played an important role in the supervision. Take the OTC market supervision system in the U.S, Britain and Taiwan of our country as an example. They all pay attention to the OTC market legislation and stresses supervision on a sound legal basis. Mutiple level supervision systems are designed in accordance to different levels of OTC markets. Moreover, the listing standards and other access standards of the over-the-counter market are not high, and this low access standards are unified with strict supervision measures. Their successful experience can be used in the development of OTC market and improvement of the supervision systems in our country.Along with the development of opening-up, the growth of OTC market in our country can be divided into three stages. Since the securities market motherboard system construction in China has currently been almost finished, the construction of over-the-counter market has become the focus. By now, an OTC market has been formed with the angency transfer system as the main body. It regulates the operation of the market mainly through the Chinese securities association; the brokers system is the core of the system operation; government agencies and securities industry association are also partly responsible of the supervision, and thus the specific supervision system of OTC market has been set up. But the OTC market in our country is far from being able to meet the needs of rapid development of national economy, and the OTC market regulatory system remains to be perfected. Specifically, there still exists blurred understanding of the regulatory philosophy of the OTC market; the construction of legal supervision system is still behind the demand of the market; there are still flaws in the regulatory mode of the OTC market; the responsibilities of government agencies, industrial association and relevant main market entities needs to be clarified; the specific supervision system, including market access system, information disclosure system and trading system also needs to be further improved.After the world financial crisis, our country was faced with the problem of economic transformation and upgrading of the industrial structure. A large number of small and medium-sized enterprises need funds urgently. Then only by developing the over-the-counter securities market can these needs be met. Supervision over the OTC markets has to be strengthened and at the same time excessive regulation should be avoided so as not to restrain the vitality of the market. By taking both the OTC supervision systems in developed countries and the actual situations in our country into consideration, it can be concluded that the only choice left is to expand the scale of the OTC market and put both the national OTC market and counter markets of lower levels under unified supervision. At the same time, we can further perfect our national OTC market supervision system from the following aspects. A correct concept of supervision should be set and supervision must be carried out legally, fairly and properly. The OTC market legislation should be further improved. Government regulation and the self-discipline of each industry should be combined, and this not only means attaching great importance to the role of the government in OTC market supervision, but also fully mobilizing the self regulatory enthusiasm of respective industrial organizations. Specific rules of the OTC market supervision should be regulated, including strictly controling the entry and exit mechanism of OTC market, improving information disclosure system, enhancing the transparency of OTC market, perfecting the OTC market trading system, strengthening the supervision of the market maker and implementing unified OTC securities registration system.