China Introduced A Market Maker System, Institutional Barriers And Ways To Achieve

The construction of the market and the bargain system, as one of the decide factors of the market behavior, are getting more and more important in the theories of microcosmic structure of the modern securities. These new theories express that policy establishment can choose the bargain system affect the trade with list price behavior, therefore make the list price more valid and lower the cost, benefit both investor and issuer at all. There are two kinds of the construction in western countries. One is auction system most be used in the exchanges and the other one is market make system most be used in the over the count market but also a few exchanges. There are four elements involved in those two systems: mobility, trade cost, market efficiency and motion. Mobility means the market is able to get the trade quickly with no big motion of the price, trade cost issues the price that investors must to pay for the trade. Efficiency means the transportation of the information and the function in the list price. Motion means the multifarious and the range of the price's changing. Both of the two list price systems have their own advantage and weakness. The biggest advantage of market maker system is that it can serve the investor as soon as possible at given the mobility of the securities therefore, stabilizing the prize of the securities. Market maker system started earlier and mixed with auction system finally, after a long history of replace by these two systems.There is some historical factors issue the advancement of the market maker system. Our securities market didn't legislated the market makers because there were lots of the obstacles in our legal system with the financial situation by that time.There are big risks in the market maker system. It's hardly to divide the risk and the cost. The best way to avoid the risk is that analyzing the costs. The factors below are usually involved in the market maker's costs, (1) dealing with the order (2) storing of he commodities (3) unbalance of the information. Our securities market is still advancing that we have to pay for the costs of supervising and construction for extra. The risks of market maker system are both to investors and to market makers. Itcan be a along time job to transplanting the market maker system and the best way could be that leaving some room for improvement in the future.