The Influence Of The Interaction Of Trading Systems On The Quality Of Stock Market

With the rapid development of China's economy and the rapid improvement of national strength,the importance of the stock market in rationally allocating resources and serving the real economy has become increasingly prominent.However,due to the late development of China's stock market,relevant laws and regulations,operational rules and trading systems need further reform and improvement.In July 2018,the China Securities Regulatory Commission(CRSC)made a decision on the revision of the “Opinions on Reforming and Perfecting the Delisting System of Listed Companies”.On February 27,2019,the chairman of the CRSC,Yi Huiman,stressed at the press conference held by the State Council Information Office that the revision of the Securities Law and other laws and regulations should be accelerated.At this point,the reform of the stock market trading system has lagged behind,and the revision of relevant regulations is still under extensive research and discussion.At present,the reform of the trading system in the academic circles mainly focuses on the reform of the price limit system and the revolving trading system.In most developed countries,the stock market has no price limit and implements the T+0 revolving trading system.However,China's stock market has long been implementing a 10% up and down price limit system and a T+1 revolving trading system.Therefore,there is much controversy in the academic community about whether to relax the price limits and restore the T+0 revolving trading system.Most of the existing domestic and foreign literatures focus on the separate effects of the price limit system or the rotary trading system on the stock market,but lack the research on the interaction of multiple trading systems on the stock market,which makes the work of this paper have important academic value and guiding significance.Based on the above background,this paper uses the literature research method and the empirical research method to conduct an in-depth study on the impact of the interaction between the price limit and the revolving trading system on the quality of the stock market.Firstly,this paper conducts a preliminary test on the interaction of two trading systems by establishing a linear simultaneous equation model.However,since the linear simultaneous equation model cannot overcome the influence of other factors before and after the event on the empirical results,this paper uses the difference-in-differences simultaneous equation model to further test the interaction of the trading system.Secondly,this paper tests the robustness of the linear simultaneous equation model and difference-in-differences simultaneous equation model by replacing the variables that measure the stock market quality.Finally,based on the empirical results and the development of China's stock market,this paper conducts an in-depth discussion on the reform of the trading system and gives conclusions and suggestions.Through empirical analysis,the paper draws the following conclusions: First,the results of the preliminary test indicate that the simultaneous implementation of the price limit and the T+1 revolving trading system have a negative interaction with the liquidity of the whole stock markets and the market efficiency of Shanghai A-share market and Shenzhen stock market,and it also has a positive interaction with the volatility of Shanghai A-share market and Shenzhen stock market;Second,the results of further tests show that no matter the price limit system starts from scratch when the revolving trading system is T+1,or the revolving trading system has been changed from T+0 to T+1when there is price limit,stock market liquidity is reduced,volatility is increased,and market efficiency is reduced,that is,the implementation of both the price limit and the T+1 revolving trading system lead to a decrease in liquidity in the stock market,an increase in volatility and a decrease in market efficiency;Third,the above conclusions are still robust after changing variables;Fourth,based on the research conclusion and the development status of China's stock market,this paper believes that the reform of the trading system is imperative,but the timing and conditions of the reform are open to question.