Research On The Relationship Between Trading Mechanism And Liquidity In The New OTC Market

Small and medium-sized enterprises are the largest component of Chinese enterprises and play an important role in economic growth.However,due to the inability of small and medium-sized enterprises to meet the listing standards of the A-share market,the difficulty of financing has restricted the development of enterprises.In order to solve the financing problems of small and medium-sized enterprises and promote economic growth,the New OTC Market officially expanded in 2013 and accepted the application for listing of enterprises across the country.The New OTC Market has a low listing standard and provides financing platforms for many innovative,entrepreneurial and growth companies.Since its inception,the New OTC Market has developed rapidly and has become the first securities exchange place with more than 10,000 listed companies in the world.However,at the same time that the number of listed companies in the New OTC Market surged,the volume and turnover did not reach a high level,and the liquidity level remained in a depressed state.The level of liquidity is affected by many factors,of which the trading mechanism is an important reason.At present,the trading mechanism of the New OTC Market has the following three problems: the stratification standard is unreasonable;the rights and obligations of market makers are not equal;and the entry threshold for qualified investors is too high.Regarding the relationship between trading mechanism and liquidity,scholars at home and abroad have different opinions and have not reached a consensus conclusion.Aiming at the relationship between trading mechanism and liquidity,the paper establishes a regression model and uses Propensity Score Matching,Differences-in-Differences and regression analysis method to conduct empirical research.The research results show that the Market Maker Rule is conducive to improving liquidity.The Stratification is conducive to improving the liquidity of stocks which choose market making transfer mode,and does not improve the liquidity of stocks which transfer by agreement.The number of investors is positively related to liquidity.Based on the above conclusions,the paper believes that reforming the trading mechanism is the only way to improve liquidity.In response to the problems of the trading mechanism,the paper puts forward the following policy recommendations:adjusting the stratification standards,defining the rights and obligations of marketmakers,lowering investor thresholds.