Market maker system is a trading quotation system. Call auction (Exchange) system and market maker system, which we are familiar with, are two trading quotation systems. At present, the call auction system is adopted in the securities market, where buyers and sellers submit their own trading orders, and the trading center collects and matches the entrusted price to complete the transaction. Market maker system means that the buying and selling prices of securities transactions are given by brokers (called market makers), and investors make trading decisions independently according to the buying and selling prices and quantity quoted by market makers.
Note that the investors here only passively accept the price quoted by the market maker, which quotes a two-way price, that is, for the same stock, the market maker quotes both the buying price and the selling price. All investors' counterparties are market makers. After making a quotation, the market maker is obliged to accept the investors' demand for buying and selling at this price. In other words, market makers must have enough securities and funds to meet the requirements of investors to buy and sell securities.
(A) the function of the market maker system
The market maker system has a history of hundreds of years, and its role in the financial market has been recognized by all walks of life: the market maker system has the function of activating and stabilizing the market. Relying on its open, orderly and competitive quotation-driven mechanism is an inevitable product of the development of market economy and an effective means to improve market liquidity, stabilize market operation and standardize market development.
Specifically, the market maker system has the following three functions:
1. Enhance the liquidity and activity of the market.
Since the investor's transaction object is the market maker, and the transaction price is the price quoted by the market maker, investors need not worry about not finding a counterparty when submitting the entrustment. It is through market makers' constant two-way quotation and readiness to accept transactions that the liquidity of securities can be maintained.
2. Stabilize market speculation
When there is excessive speculation in the market, market makers try their best to maintain price stability and reduce the bubble component of the market by operating in the opposite direction to other investors. When the stock market is too calm, market makers artificially buy and sell stocks in the market to enliven market sentiment and return the stock price to its investment value. Since the quotations of market makers are generally within the scope stipulated by the regulatory authorities, there are usually several market makers in each stock, and the quotations of market makers are generally based on value estimation.
When the buying and selling power in the market is seriously unbalanced (for example, buying is far greater than selling), market makers can and have the obligation to join the weak side (for example, selling their own stocks) and quickly change the market supply and demand situation, thus curbing excessive speculation. In the case of multiple market makers, the cost of each market maker is different and the quotation is different, forming a kind of competition. In the end, the quotations of market makers converge, the spread narrows and the weak market makers decrease.
3. Supervise the market.
While exercising their rights and fulfilling their obligations, market makers should monitor market changes through their business activities in order to find anomalies and correct them in time. In the emerging securities market, this is a useful attempt to keep a reasonable distance between the government and the market and offset the inertia of the government's behavior towards the market.
(2) Conditions, obligations and rights of market makers.
It is precisely because the market maker system has the above functions and the characteristics of adjusting the imbalance between buying and selling and ensuring the two-way price of buying and selling at any time that the premise of realizing its functions is to have high-quality market makers. The selection of market makers is strict, and only those businesses with standardized operation, strong capital strength, large scale, familiarity with market operation and strong risk self-control ability can undertake it.
Generally speaking, a market maker must meet the following conditions:
1, with strong financial strength, so as to establish sufficient stock of the underlying commodities to meet the trading needs of investors.
2. Have the ability to manage commodity inventory to reduce the risk of commodity inventory.
3, to have accurate quotation ability, to be familiar with their own business target goods, and have strong analytical skills.
As a market maker, its primary task is to maintain the stability and prosperity of the market, so the market maker must fulfill the obligation of "making the market", that is, under the condition of avoiding the ups and downs of the market price as much as possible, undertake the task of two-way quotation of securities at any time, and quote as long as there are orders.
In view of the obligations undertaken by market makers, they should also enjoy the following privileges:
1. information, enjoy the records of all the trading orders of traders, so as to know the omen of unilateral market in time.
2. Priority of margin financing and securities lending. In order to maintain the liquidity of the market, market makers must always have a large number of chips to maintain the transaction, and have certain funds as the backing, but this is not enough to ensure the continuity of the transaction. When large-scale transactions occur, market makers must have legal, effective and low-cost financing and securities lending channels and give priority to financing and securities lending.
3. Short selling mechanism under specific conditions. When most investors do multi-market, market makers have limited chips and must enjoy a certain proportion of short trading to maintain the continuity of trading.
4. Tax relief. Market makers trade frequently, undertake the transactions of buyers and sellers at the same time, sell for the sake of buying and selling, and profit from the difference between buying and selling, which inevitably requires tax relief.