The Research On Market Maker System Of Commercial Banks In China's Gold Market

The market maker system, a basic system to stabilize market price fluctuations and to improve transaction efficiency, has been widely used in the developed capital market. However, in the past ten years of China's gold market's development process, the bidding system was implemented most of the time. As a result, market maker vacancy became a fundamental problem for China's gold market. At present, the market maker system is launched in China GEM market and the inter-bank bond market, proved to be effective. Therefore, for China's gold market, the implement of market maker system becomes more and more urgent, considered to be a key step in China's gold market's attempt to chase the international mature gold markets.Looking at the world's mature gold markets, commercial banks, with their incomparable financial strength and distribution network system, act as the main market makers. From the own situation of China's gold market, more and more local banks and joint-stock banks stepped into the gold market since May 2002, when the People's Bank of China approved the four big station-owned banks to develop gold businesses. Those local banks and joint-stock banks became the main force in the prosperity of China's gold market, and also make the market maker system in commercial banks in China's gold market under deep accumulation foundation.The paper tries to use methods like comparative analysis, literature research, empirical research and experience summarization to make research on the necessity and feasibility of the market maker system in commercial banks in China's gold market. The paper also discusses the risk control for commercial banks as market makers, and gives some advice on the system design.The innovation of this paper lies in the use of first line data of the trading market to make in-depth research on the existing liquidity problems and the weakness on existing market maker system in China's gold market, also lies in the further discussion, on the basis of previous model, on the capital structure risk and its prevention in the commercial banks' market making process.This paper is divided into four chapters; the main contents are as followed.The first chapter is a brief introduction of the research background, contents and the purpose of the study.The second chapter is a literature review, where the literature about China's gold market and market-maker system are displayed, and their views are summarized.The third chapter is the analysis of China's gold market. The author begins with the empirical analysis of the liquidity problems and pricing mechanism of the domestic gold market to prove the existence of limitation in these two aspects. On this basis, the author discusses the necessity of the market maker system to China's gold market, and analyzes the deficiency of the proposed market-maker system in China's gold market.The fourth chapter is the analysis of market maker's risk and risk control in China's gold market. The author combines the market data with the basis of the existing model to discuss the risk and risk control of commercial banks in market making process.The fifth chapter discusses the regulation problems of China's on floor and OTC gold market, and gives some suggestions to improve the regulation system.