The Study On The Legal Regulation Of The OTC System Of China’s Stock

In2004,"Some Opinions of The State Council on Promoting The ReformOpening And Steady Growth of Capital Markets" which was released by the StateCouncil in2004pointed out the opinion that establishment of the multi-level stockmarket system” and the direction of the development of multi-level capital market. Inrecent years, China’s Over-The-Counter (OTC) Markets have sprung up, which is therequirement both of the development of the multi-level capital market and theobjective laws of the flow of the securities. The development of China’s OTC marketis a never hold back big trend.The first part of this article defines the general theory of the OTC market,over-the-counter trading system. The OTC market is a relative concept to the StockExchange. The traditional view of the standard to distinguish the two is based onwhether there is a fixed place of transaction, but the author think it should be toperceive the essence that the two should be defined by the trading system of differentdesigns. Trading system mainly includes two aspects which are the transactions andtransaction forms; transaction is the core content of the OTC trading system.Securities transactions consist of the agreements system, market maker system andauction system. The transactions in practice may be colorful, but it can bedecomposed into the above three categories.In the beginning of the reform and opening up in China, the counter tradingcenter, STAQ system, NET system are the typical forms of the China’s OTC market,reflecting the historical trajectory of the development of OTC market. In the current,the New Three Board, Tianjin Equity Exchange and the regional trading center ofOTC market build up the China’s OTC system. OTC system has differentmanifestations in different periods of different OTC markets. After the China’s reformand opening up, we can divide the period into three parts which are Recovery andDevelopment period, Acceleration and Adjustment period and standardizeddevelopment. This article analyzes and summaries the OTC market in each period andmake clear the history of over-the-counter trading system and the existing problemsbased on the analysis of the development trend of China’s over-the-counter system.The problems of the China’s over-the-counter trading system include legislativegaps, the vague of the regulatory body, difficulty to determine the legality, lack ofsupporting systems, difficulty to centralize. In2005, the amendments to the Securities Act and the Companies Act establish the legal basis for the development of China’sOTC market, but the legislation is still in the blank of the OTC system which isunable to guide and regulate the OTC practice. This article analyzes the legal basisand the realistic basis from three aspects of the legal, policy, and practical experience.The author thinks that China already has the conditions to legislate from the legalperspective; should be timely to replace the low force of law and the administrativepolicy by a stronger force of law and build China’s over-the-counter trading systemfrom the aspects of the supervision of the OTC trading system, standards of legality,behaviors prohibited and supporting systems.OTC system is an important part of the over-the-counter market system. To makethe study centralized and deeper, this paper only focuses on China’s OTC tradingsystem. The author believes that it is still not enough to regulate the OTC market inChina only doing the research in the respect of the OTC system and system building.Relative to the stock exchange system of the legal status of the OTC market, makingthe study in the forms of organization, market access, information disclosure and theliability also has the theoretical and practical significance.