China's Foreign Exchange Market-maker System Operating Effect

In recent years, the RMB exchange rate has caused wide concern home and abroad with the economic globalization, how to form a rational exchange rate level is the focus of public attention. As the core sites of the RMB exchange rate, the foreign exchange market's operating conditions have a direct bearing on the reasonableness of the RMB exchange rate and the level of China's foreign trade, it also relations with the economy running smoothly. Financial market microstructure theory suggests that the operation of trading systems and market are closely linked within. As a major trading system on the international foreign exchange market, market-maker system's function, improve market liquidity , stability and effectiveness, has been proven. In view of this, on January 4, 2006, China's official introduction of the foreign exchange market-maker system, China's exchange rate formation mechanism and the foreign exchange market has undergone profound changes.Foreign exchange market-maker system has been running 4 years, how it's operation result is, whether it played a positive role in the market, whther it achieved the original intention of the introduction, these isuues to further improve the China's foeign exchange market is important, and is worth further investigation. But now, Chinese scholars on the operation result of the foreign exchange market-maker system is still inadequate, ande theory is more than empirical study, all of this is unfavorable to further develop the foreign exchange market-maker system. Topic of this article is in the context of this proposed.In this paper, the financial marker microstructure theory is the basis, China's foreing exchenge marker-maker system is the object of the study. By combining the theoretical analysis and empirical testing method , this paper investigate the changes of the foreign exchange market's liquidity, stability and effectiveness afer the introduction of the market-maker system, and proved the system indeed played a positive role in our foreign exchange marker. Also summarized the forign exchange marker-maker system in China, there are still some problems and suggestions. All above is very important to developing the marker-maker system, improving the foreign exchange marker operating conditions, in-depth and far-reaching reform of exchange rate formation machnism.