Research On The Solution Of The Market Maker Mission Drift Problem In NEEQ

In December 2013,NEEQ extended to other areas of the country after nearly 8 years of pilot,as an important part of the multi-level capital market of China.NEEQ introduced market-making system from August 2014 and after 2 years NEEQ have fret about the market maker mission drift problem that the NEEQ market maker used their market advantage for the maximization of their own interests and ignored their natural business functions(such as providing liquidity,price discovery and keeping the stability of the market,etc.).NEEQ is regarded as the Stock Exchange so that the reasonable trading system is one of the core competitive strategies for NEEQ.If the market maker mission drift problem continues and deteriorates NEEQ would probably lose its development momentum because the market maker system lose its function.Therefore,this paper proposes to design the hybrid market system by combining the NEEQ’s reality to solve the problem of "alienation" of the market maker,which is not only helpful to improve NEEQ transactions,and to enhance the core competitiveness of NEEQ but also mean a lot for the construction of China’s multi-level capital market.The market maker’s main purpose is to obtain revenue so that they will make full use of the rule to expand their revenue when they are permitted by the rules or in a supervision gray zone.The most fundamental reason for the NEEQ market maker mission drift is market system deficiencies.Specifically,the market maker system of NEEQ is generally the traditional competitive market maker system.the market maker mission drift problem is mainly due to the traditional competitive market system’s defects,as well as NEEQ’s the irrational design in market maker system.From the international practice point of view,the hybrid market maker system formed by the traditional competitive market maker system introduced the auction transaction composition,would be an effective way to deal with the problem of mission drift when the hybrid market maker system combined with targeted adjustment the actual situation of NEEQ.American Nasdaq’s hybrid market maker system is a model of the global market maker system.And NEEQ is considered the Chinese version of the Nasdaq.This paper compares the two market rules of Nasdaq and of NEEQ to reveals the difference between two systems and the reasons of the difference behind two systems.In addition,according to the practical experience of the Nasdaq market and the actual situation of NEEQ,a suitable hybrid market maker system is put forward for NEEQ by this paper.Compared with the current system ofNEEQ,this paper has several aspects to design the mixed market system to solve the problem of market maker mission drift: the introduction of the bid component to improve the pricing quality of the market,the increase of market maker’s quantity and types,as well as the adjustment of market makers’ obligations and profit models.This paper also demonstrates the validity and feasibility of these system designs to ensure that the problem of market maker mission drift can be solved,which can promote the healthy development of NEEQ and improve the multi-level capital market of China.