Wen/Qi Bin (China Securities Regulatory Commission [Weibo] Director of the Research Center, Executive Director of Beijing Securities and Futures Research Institute)
In terms of time sequence, the construction of the new third board market and the fourth board market should give priority to the new third board market, but they can also start at about the same time. They are not contradictory, but more complementary to each other. If the new third board is completed at a relatively fast speed and developed in a large scale, the urgency of building the fourth board will be partially alleviated.
Ten thoughts on multi-level capital market system This paper was originally completed in January 2012, which was an internal research report formed when the author thought about the multi-level capital market system. At present, the construction of the new third board has been carried out nationwide, and the construction of the fourth board has also been carried out in an orderly manner in various places. Now, a few revisions of the original text are published, with a view to providing reference and reference for the ongoing construction of the multi-level capital market. The multi-level market discussed in this paper refers specifically to the equity market.
1、 Exchange market and OTC market
The over-the-counter market and the over-the-counter market are not antagonistic in nature. In a sense, their boundaries are vague and can also be transformed. The differences only lie in liquidity, price discovery mode (collective bidding or brokering), brokering participation methods, etc.
For example, the over-the-counter market and the exchange market are not static, and the over-the-counter market can be upgraded to an exchange when it develops to a certain extent. The early transactions of the United States on the roadside carriages outside the New York Stock Exchange are OTC transactions. In 1971, the United States linked their OTC markets across the country with electronic networks to form NASDAQ [Weibo] The market, due to its rapid development and enhanced liquidity, in the late 1990s, NASDAQ applied to the U.S. Securities Regulatory Commission to become an exchange.
In addition, due to the rapid development of electronic networks, at the beginning of the 21st century, some large securities companies in Europe and the United States actively traded on the Internet, forming an OTC market in a sense, intending to partially replace the functions of exchanges.
2、 The multi-level capital market will form a "positive pyramid"
From the perspective of top-level design, China can form three major levels: the exchange, the national equity transfer market (the "New Third Board" for short), the regional OTC market (the "Fourth Board" for short) and the over-the-counter market of securities dealers (the "Fifth Board" for short), serving the diversified national economic development needs and the investment needs of multi-level investors. The three are different in terms of access threshold for listed or listed enterprises, investor qualification management, information disclosure requirements, liquidity, trading methods and supervision methods, but the basic principles should be the same, that is, "books are the same, vehicles are the same". The development of these three levels of markets will eventually form a "positive pyramid" multi-level capital market system.
Below this are nearly 10000 PE and VC institutions, as well as more and more angel investors, which will form a benign interaction with the multi-level capital market system.
Table 1. Building a multi-level equity capital market 3、 Main board, SME board, GEM and NEEQ
The main board, small and medium-sized board and GEM market in the exchange market will focus on information disclosure and promote the stock issuance registration system. We will appropriately relax the GEM's financial access indicators for innovative and growth oriented enterprises, establish specialized levels, create conditions for unprofitable Internet and technology innovation oriented enterprises to list on the GEM, and implement different investor appropriateness management systems. The new third board market will feature lower access conditions and more convenient approval, provide a transfer mechanism, gradually increase activity and liquidity, expand private investment channels, solve a large number of financing problems for SMEs, and ease IPO pressure. It is estimated that there will be thousands of listed companies in the next 3-5 years.
4、 Four plate and five plate
The OTC market under unified supervision includes the fourth board and the fifth board. The fourth board, namely the regional equity market, will help solve the financing and restructuring needs of more basic enterprises, provide reserves for high-level markets, and integrate different markets between regions in the future. The fifth board, namely the over-the-counter trading market of securities dealers, will take a single securities dealer as the starting point, try OTC trading and business, and gradually expand to the networking or alliance between securities dealers; It can also integrate or cooperate with regional markets.
5、 Turnplate mechanism
Enterprises at three levels can freely transfer boards, as long as they meet the access requirements of the transferred board. If the exchange is compared to a university, the national OTC market (i.e. the new third board market) can be compared to the national RTVU, while the regional OTC market (i.e. the fourth board market) can be compared to licensed cram schools or training institutions.
For example, companies delisted from the exchange plate can enter the New Third Board or a certain fourth board market for trading; If a company traded on the fourth board meets the standards, it does not need to go through the new third board market, and can directly apply for listing on the exchange.
6、 Construction timing and risk prevention of the new third and fourth board
In terms of time sequence, the construction of the new third board market and the fourth board market should give priority to the new third board market, but they can also start at about the same time. They are not contradictory, but more complementary to each other. If the new third board is completed at a relatively fast speed and developed in a large scale, the urgency of building the fourth board will be partially alleviated. However, in the long run, due to the large number of small and medium-sized enterprises in China, there is a huge demand for financing and improving the governance structure, and the demand for wealth accumulation and management in society is also surging. The necessity of the fourth board still exists.
For enterprises that cannot enter the exchange or the new third board for the time being, listing on the fourth board will have many benefits, such as improving the governance structure, enhancing transparency, accepting market supervision and constraints, so as to improve the quality of enterprises and even the overall economy, just as students who have not been admitted to university for the time being can still benefit a lot from studying in cram schools. The rise of these regional markets will greatly promote the development of local market economy.
During the construction of the New Third Board and the New Fourth Board, institutional arrangements should be made in several aspects to prevent or reduce some problems such as excessive speculation in the development of the GEM, but new problems will inevitably arise, and the management of public opinion and investor expectations should be one of the priorities of the work.
7、 Supervision and management of the fourth board
The construction of the fourth board can be entrusted to the local government, but it should also give full play to the strength of market institutions, employ professionals familiar with the capital market for management, and establish a regulatory coordination mechanism. In order to prevent possible risks and the phenomenon of "letting go of chaos", the construction of the fourth board can be carried out according to the provincial administrative units in principle, and should follow the general operating rules of the capital market, so as to form a unified market system; Or reform the property right exchange with better conditions, "one by one when mature".
Investors should be limited to their own regions and have certain qualification requirements. Local governments can be responsible for specific daily supervision and risk disposal, but they should establish a coordination and supervision mechanism with local securities regulatory bureaus, such as the joint meeting system, to ensure that the overall operation mechanism of the multi-level capital market system is basically consistent. In case of serious problems, the CSRC can condemn or even revoke its license.
We should attach importance to capital market talents in the construction of the fourth board. Due to the general lack of talents in the capital market, more professionals familiar with the capital market should be recruited and attracted. Their participation in local economic construction will also better expand the coverage of the capital market and effectively promote the development of the local economy. A common misconception is that only local government agencies are dispatched to form the fourth board market management team.
8、 The construction of the fourth board should attach importance to two types of regions with developed economy and strategic significance
The construction of the fourth board can be carried out in batches according to the developed economy and the development needs of enterprises. Areas with relatively developed economy and rich enterprise resources, such as Beijing, Shanghai, Guangdong, Zhejiang, Jiangsu, Shandong and other places, have relatively mature conditions and can be promoted first.
Areas with strategic significance, such as Xinjiang, Fujian and Guangxi, should also focus on promoting. This will strengthen the radiation of China's economy to surrounding countries or regions, and create a more favorable surrounding environment for China's economic rise. For example, no other city competes with Urumqi within a 1000 km radius. If Urumqi can develop an active four board market, under the open conditions of management, enterprises from Kazakhstan or Kyrgyzstan may come to Urumqi to list or finance, which will help China to finally solve the problems of East Turkistan and other countries;
For another example, the fourth board market in Fujian or Xiamen can be managed to open to small and medium-sized enterprises and high-tech enterprises in Taiwan, becoming an important measure to further strengthen economic ties with Taiwan, integrate Taiwan's economy, and accelerate the reunification of the two sides of the Taiwan Strait; For another example, the fourth board market in Guangxi or Nanning can be opened to Vietnam and other ten ASEAN countries in a managed way, radiating China's economic influence to this region.
9、 Cross regional market and regional market integration
The construction of regional markets will inevitably be carried out in batches due to different levels of economic development and construction processes in different regions; At the initial stage of the development of the regional market, it can be limited to opening only to enterprises in the region; After a certain stage of development, we can introduce a certain competition mechanism, moderately allow regional markets to open to enterprises in other regions, or moderately allow cross regional mergers and acquisitions in regional markets, thus forming a number of large-scale regional markets; Some regions with underdeveloped economy and little need to build regional markets can also consider to build with neighboring regions and be covered by the market from the beginning. For example, Tibet can consider to build a four board market with Sichuan.
10、 Integration of trading platforms in Greater China
In the next few years, the four major exchanges in Shanghai, Shenzhen, Hong Kong and Taiwan can be considered to establish cross regional unified trading platforms or carry out certain integration to improve market trading efficiency, enhance scale effect, and further strengthen the concept of the Greater China Economic Circle, form the core of East Asia's financial and economic sectors, enhance international competitiveness with New York London and other international financial centers have formed a confrontation situation.
The scale effect of this unified trading platform will probably make the exchanges of neighboring financial markets such as South Korea, Japan, Singapore and the ten ASEAN countries actively request to join, otherwise they will face the risk of marginalization. To promote according to such development trends and road maps will effectively help China's economy integrate with surrounding economies, help to defuse the forces that contain China, and promote the rise of China's economy.
(The author of this article introduces: the founder and CEO of Xinxindai. He has profound and unique views on microfinance and took the lead in introducing mature British microfinance technologies and concepts in 2013.)
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