A Research On Introduing Market-Making System Into China’s Gold Market

Market making system, one of the trading systems, is different from the traditional auction system. By definition, market-makers are organizations which provide two-way quotation unceasingly to the public and accept investor’s business requirements in the OTC market, they can provide sufficient liquidity to the market, guarantee the stability of the price, and realize the function of price discovery.Compared with the world gold market, gold market in China is still in the initial stage and the development is imperfect. There is no market makers provide investors with trading liquidity. In order to promote the development of China’s gold market, we must fully study and draw lessons from the international gold market, develop our own market making systems. In the near future, China will have discourse power in the international gold market.Firstly, this paper gives a general overview of market-making system, a contrast analysis of the similarities and differences of market-making system and auction system. It also discusses the origin of the market-making system-the NASDAQ stock market, and shares the practical experience of market-making system in early financial market of China.Secondly, from the perspective of defects of China’s gold market pricing mechanism, the author discussed many problems of China’s gold market during the development, on the other hand, through the correlation and hysteresis analysis of Shanghai Gold Exchange gold settlement price and London settlement price, the author illustrates that the gold price in China changes with the international gold prices, therefore, to introduce the market-making system to our country is of great significance in competing for the gold pricing power.Lastly, this paper further puts forward the methods of introducing market-making system in China’s gold market. It is suggested to perfect the relevant laws and regulations and establish the market-makers regulatory system which should take the principle of "based on self-discipline management, with gold exchange supervision as guide, the government has the final legal supervision". In addition, we should strengthen the supervision of regulators to ensure fairness, legitimacy and efficiency of the regulatory system.