Research On The Legal System In Our Regional OTC Markets

Currently, in order to solve the problem of financing small and medium-sizedenterprises (SMEs), local governments are stepping up to build their own regionalOTC market, the regional OTC market is being established in various regions ofChina rapidly. However, the National SMEs Stock Transfer System which establishedin2013, gives an enormous challenge to our hypoplasia regional OTC markets.Based on the background of the establishment of the National SMEs StockTransfer System, combined with the actual situation of regional OTC markets in ourcountry and summing up its main problems, referring to the mature internationalcountries and regions of its successful experience of OTC markets, this paper putsforward solutions in the aspect of law meanwhile. That is to say, through theestablishment and perfection of the system to safeguard the healthy and stabledevelopment of China’s regional OTC markets.This paper consists of preamble and text, which is divided into four parts.The preamble introduces the background, the significance, the structure, themethods and innovations of this paper. In addition, it also makes a literature reviewabout the existing research of the OTC markets.The first part introduces the development status of regional OTC marketsthrough the elaborating of the capital market environment faced with the regionalOTC markets and the practical developments of the reginal OTC markets all aroundthe country.The second part generalizes the main difficulties faced with regional OTCmarkets. The first challenge comes from the National SMEs Stock Transfer System,the second problem is their lack of liquidity, the third difficulty is the absence ofregulatory system.The third part sums up the development experience of developed capital markets’OTC market through the examine of its OTC markets’ operating condition,particularly its institutional design in OTC markets.The fourth part is the focus of this paper. Drawing on the valuable experience ofthe developed capital markets, it proposes legal solutions for the plight of China’sregional OTC market: Firstly, for the challenges comes from the National SMEs Stock Transfer System,this paper proposes to establish “a multilevel OTC market system in China,in whichthe National SMEs Stock Transfer System is the highest level of OTC market, withregional shares transfer platform to be the second level of OTC market”, and the highand low access threshold settings and orderly transfer plate lifting mechanism tohandle the relationship correctly between the two. Among them, in order to ensure theOTC market’s cultivation and incubation function, regional OTC markets should notbe set financial targets, while the national OTC market through certain financialindicators should be set to protect it as a high-level capital market filtering capabilities.In addition, regional OTC market mechanism should include both the Transfer venuewithin the market and Transfer mechanisms between OTC market and the exchangemarket, and the national OTC market is not the necessary stage for enterprises listedon the OTC market regional to enter exchange market, namely regional OTC listedcompanies can enter the exchange market through "the more board";Secondly, for the low market liquidity, and its unfunctional investment andfinancing, this paper proposed through "formulating relevant policy to encouragefinancial innovation, rich types of financial products to meet different risk preferencesand financial needs of consumers","Reducing barriers to entry, improve theinformation disclosure mechanism to ensure that the quantity and quality of listedcompanies,""flexible set of trading mechanisms, elastic combination biddingmechanism and market maker system to adapt to different levels of development ofmarket requirements, while ensuring market liquidity savings transaction costs ","establish a sound security mechanisms to ensure that listed companies’ repaymentability to activate the equity pledge financing business "to be resolved;Lastly, for the absence of regulation, this paper proposed to "explicitly stipulateregulatory body, establish a unified tiered regulatory system to safeguard the stabilityof the OTC market system and regional OTC market’s personality" and "theestablishment of self-regulatory and administrative supervision of combiningregulatory model to ensure unity of the regulatory costs and efficiency"," establishlifelong sponsor brokerage system to ensure brokerage’s active participation andeffective supervision".