The Research On Situation And Strategy Of The Market Maker System Of The Market Of National Equities Exchange And Quotations

On July 16th.2001, the stock transfer agent system was established to solve the liquidity problem of state-owned corporate stocks and delisted shares from the main board, which is called "old third board". On January 16th,2006, in order to improve the third market's position in the capital market, and to attract more potential small enterprises to list,< The experimental method of share transfer and pricing of the Zhongguancun Science Park unlisted limited companies in the stock transfer agent system> was published, known as the "new third board". On January 16th,2013, the National Equities Exchange and Quotations(NEEQ) was formally established in response to the national call to set up a multi-level capital market system, and to further enhance the market resources allocation function of Over-The-Counter Market.There are about 4000 companies listed on National Equities Exchange and Quotations until November 2015, and there are about 80 "new third board" market makers, averaging 3.7 market makers for each listed company. The trading volume of listed stocks in the market amount to 1.257 billion RMB and accumulative trading volume of listed shares is 176 billion RMB. With the further development of the market, National Equities Exchange and Quotations requires continuous reform. To better adapt to market changes, and to promote the healthy development of the market, National Equities Exchange and Quotations introduced market making system. Despite the many advantages of the market making system, it remains a controversial topic in the industry. After the introduction of market making system, problems like the lack of liquidity, large fluctuations in performance, stable and low valuation, financing difficulties and etc. remained. Based on the domestic and international research, the introduction of market making system is important and necessary, but further research on how to effectively solve the existing problems in the "new third market" is in demand.In the first part of this paper, theories of National Equities Exchange and Quotations and market making system theory are analyzed. The development of National Equities Exchange and Quotations and its trading system was introduced first. And the development of the market maker system was described, with in depth analysis on the running foundation of the market making system, the development model and the core function, making preparation for further study of present situation and problem analysis about the market making system development. Finally, the paper analyses the significance of the introduction of the market making system.In the second part, the paper carries on the analysis to the current situation of the market makers, goes through the current problems of the market maker trading mechanism, and analyses the underlying cause based on data. From the macro prospective, the market faces liquidity challenges, and the market making system is not perfect. From the micro prospective, the market makers and market trading participants are also facing operational challenges. Market makers are challenged by monopoly, operational difficulty and inappropriate internal structure. Market trading participants, including the listed companies and investors, are all facing the problem of operations.The third part of this paper focus on analysis of the development strategies of the market trading mechanism. The NASDAQ market uses the hybrid market making system and auction transaction mode, and the Taiwan OTC market uses the traditional market maker trading system. Drawing from their experiences, this paper proposes specific measures for the development of the market making mechanism, and also proposes measures to ensure the smooth implementation from three aspects of staff setting, security policy, and data supervision.