Maker System On The Inter-bank Bond Market Liquidity

Market-maker system is the major trading system at advanced bond markets, money market(inclding inter-bank market) and foreign exchange market in the world. In this market, maket maker is the middleman between buyer and seller, and solved the question of time asymmetry between buyer and sell, so market maker can improve the liquidty of financial market.From the scale point of view, the inter-bank bond market is the largest securities market, but also the main market of Chinese bond market.By the end of 2008, the market value of inter-bank bond market was 13.9 trillion yuan, 92% of the entire bond market in China, 1.16 times than the total market value of Shanghai and Shenzhen stock markets; in 2008, trading volume(including re-purchase) of inter-bank bond market was 100.8 trillion yuan, 99.6% of the entire bond market in China, 3.8 times than total trading volume of Shanghai and Shenzhen stock markets. The inter-bank bond market takes inquiry system as the main system, supplemented by market-maker system. Needs to be noted that the inter-bank bond market is the first financial market which introduced market-maker system as a formal system in China, which has accumulated nearly 10 years of practical experience and related data, providing us a very valuable samples.To study the market-maker system of inter-bank bond market has a strong theoretical and practical significance: on one hand, it provides a good basis and reference to trading syetem designing and optimization of Chinese bond market; On the other hand, it can offer important sample and experience to applicability of market-maker system in Chinese financial market, which provides important empirical evidence and samples to whether market-maker system should be introduced to stock market and foreign exchange market. From the analyse and test, I draw the conclusing listed below:1. From the practical experience, for bond trading, market-maker system is better than inquiry system, and should become the major trading system at inter-bank bond market.2. No matter take exchange rate or bid-ask spread as indicators, liquidity of inter-bank bond market is very low, need to be upgraded vigorously.3. Market-maker system effectively increased the liquidity of inter-bank bond market effectively.Based on the above findings, I believe that we should enhance the enthusiasm of market makers from the system, policies, and other support to improve the liquidity of inter-bank bond market constantly, so as to enable the development of Chinese capital markets more perfect.