Research Of Market Maker In Growth Enterprise Market Legal System Of China

The growth enterprise market was established in the Shenzhen stock exchange in2009. Since the establishment of the growth enterprise market for more than threeyears, it has raised the required funds for some small and medium enterprises ofChina, Which promoted the development of China’s high-tech industry. But thedevelopment of the GEM is also facing a series of problems, and the mostfundamental reason is that there is just one biding system. The auction system issuitable for the high mobile and more active market, but it is not good at the largeexchange. Since the establishment, the GEM market does not seem to lack theliquidity in the market. But from the transaction data from the overall look, it canbe seen that the liquidity is in a gradually decreasing trend. Therefore, a single auctiontrading system can not meet the need of the development of the GEM. The marketmaker system is a kind of trading system different from the auction system. In GEM,the market maker quote price and offer instant of bilateral transaction services toinvestors according to the price which they quote. By providing real-time service,they can improve the liquidity of the GEM market and maintain the stability of theGEM. The GEM could introduce market-making system to solve some problems.Throughout some successful GEMs in the world, most of them used the mixedtrading system which includes market-making system. The application ofmarket-making system, has promoted the development of the GEM market. Onerepresentation is the NASDAQ (National Association of Securities DealersAutomated Quotation)in America. The NASDAQ market used the market makersystem since its inception in1971, which has established a set of legal supervisionsystem including" Securities Law " and " the United States of America SecuritiesExchange Act of1934" and " the NASDAQ Market Rules "which we can draw from.In addition, We can learn from the inter-bank bond market and foreign exchangemarket of our country,which practiced market maker system.The GEM has some problems such as the discovery mechanism for price whichis not perfect, liquidity is not strong, a lot of volatility exist in the market, the marketefficiency is not high, speculative atmosphere is strong, the market price ismanipulated and so on. Market maker can provide real-time services to improvemarket liquidity, promote the steady development of the market. The market maker collect market information and set the the bid-ask spread according to its inventorypositions, which can discovery the real price. It promotes price discovery mechanism,and make it more to the real value of stock price. In addition, market makers couldcurb market price manipulation through buying and selling bulk stocks. Therefore, itis necessary for the GEM market to introduce market-making system. We will benefitfrom the market-making system if we can make law to regulate it. We can make somequalified securities companies to act as market maker, their rights,obligations andresponsibilities...