| Market Segmentation phenomena in China bond market is serious, and the inter-bank market plays a main role while the exchange market is being marginal. Fix income securities electronic flat was built under this background. The flat introduces the market maker mechanism, double hiberarchy, different settlement methods to different kind of bonds. It has affected the structure of bond market deeply. To study how the flat runs in the past two years, we do empirical research on the liquidity itself and the effect to other two bond markets, based on the theory of market microstructure.First, we describe the structure of fix income flat, including participants, products, trading size and so on. Second, we estimate the liquidity of the flat, using some liquidity index, and find that it was less liquid at the beginning but become better after May,2008, and the liquidity is different between bonds with different maturity. Most liquidity index of the flat are better than those of other two markets, which indicates double hiberarchy structure is much more suitable for the bond market.Apart from its own liquidity, the paper also analyses the effect of the flat to other markets. The result shows that the liquidity of the exchange market is improved after introducing the flat but the inter-bank market is not. Because they have a lot of common in participants and products, the flat distributes the trade from the inter-bank market. According to the term structure of interest rates, we find the spread between two main bond markets has gradually reduced and the yield curve is very similar in 2008, which indicates the flat plays an active role in change the segmentation.As a new thing in China's bond market, fix income flat still operates insufficiently. In the last part of the paper we analyse the existed problems and give some relevant policy suggestions. This study will achieve innovation from the following aspects. Separate the flat from the exchange market, as an individual research object. Not only study the liquidity itself but also the effect to other existed markets. Maybe it is the first time to estimate the result of changing the market segmentation. |
