Shortcomings of market maker system: lack of transparency; Increase the burden on investors; May increase regulatory costs; Possible abuse of privilege.
The market maker system is a kind of market trading system, in which a legal person with certain strength and credibility acts as a market maker, constantly provides investors with buying and selling prices, accepts investors' buying and selling requirements according to the offered prices, and trades with investors with its own funds and securities, thus providing immediacy and liquidity for the market and realizing certain profits through the bid-ask spread. Simply put: quote the price, and buyers and sellers can buy or sell at this price without waiting for the appearance of the counterparty.
The characteristics of the market maker system are as follows: a market maker makes a market for a specific security, gives a trading quotation for the security, and is ready to buy or sell at this price at any time; Investors' buying orders and selling orders are not directly matched. On the contrary, all investors trade with market makers, who act as intermediaries similar to banks. Market makers earn the difference from the difference between their buying price and selling price; If the market fluctuates too much and the market makers feel that the risk is too great, they can also withdraw from market making and do not trade; In most market makers' markets, market makers' quotations and investors' instructions are transmitted through electronic systems.
At present, China's securities and futures trading adopts the bidding trading system-investors transmit trading orders to the exchange through the network, and the exchange computer host matches the trading orders according to the principle of time priority and price priority to form a continuous trading price. According to the price formation mechanism in this trading mode, it can also be called an instruction-driven system. In the era when there was no computer abroad 100 years ago, it was through the traders in the trading pool that the purchase and sale orders were matched by open bidding. One obvious problem is that the efficiency of traders in processing orders is much lower than that of computers. In order to serve a large number of investors, OTC and market maker trading systems naturally came into being. Corresponding to the order-driven system, the market maker system is called the quotation-driven system. Market makers provide investors with bilateral quotations for betting transactions through the update of quotations, and guide the transaction price to change. Because this method is very similar to casino makers, some people are skeptical about the market maker system.