Research On Over-the-counter (OTC) Market Regulation

Over the last two decades, the size of China's capital markets has been steadily expanding. Yet, compared with the market structure of other emerging and mature markets, they still have huge room for improvement to realize further development of national economy. Moreover, the proportion of direct financing among corporations'external financing is still small. All these make it necessary to develop over-the-counter (OTC) market. With China's economy aiming to achieve a sustainable development and to promote innovation, it is important to adjust its capital market structure as well as to raise the ratio of direct funding. Due to the above reasons, the research on setting up a national OTC market under unified supervision to meet diverse needs of both investors and corporations is very important.Taking the current situation of domestic capital market into account and learning the successful experience of developed OTC markets, this article studies the concept of the OTC market from the angles of issuers, investors, and market makers respectively. As a result, this article tries to offer practical regulatory advice on information disclosure, investor suitability management, and market maker management of the OTC market.In addition to the sequence and the conclusion part, the body of this article is constituted by four chapters.The Sequence elaborates on the background, the purpose as well as the structure of this article. Besides, it also addresses some notable concepts and issues.Based on the analysis of the concept of OTC market and the comparison of other countries'OTC markets and exchange markets, Chapter one discusses the regulatory defects of the current domestic OTC markets. The next 3 chapters go on to study how to cure these defects. Chapter two addresses the information disclosure of the OTC market issuers. Chapter three focuses on investor suitability management and Chapter four discusses the possibility to apply the quote driven system between market makers and investors in China's OTC market.While governing strategies updated, our study on domestic OTC market regulation does lead to some new opinions. For example, this article points out that the comparatively high level of the overall risk is the real reason why the OTC market serves as the base in the capital market system. This article suggests that volunteer information disclosure is important to realize efficient market segmentation. When it comes to investor suitability, this article disagrees the current policy to close door for basically all individuals and argues to set up a more practical in and out market threshold. As for market maker management, this article recommends whether to implement quote driven system should be a result evaluating both the advantage and disadvantage.