政府新闻
中国交易所启动债券做市商机制以提高流动性 2023-02-09
China's Bourses Launch Bond Market-Maker Mechanism to Boost Liquidity
Bond market making, which allows third parties such as brokerages to act as intermediaries in bond trading, kicked off on the Shanghai and Shenzhen bourses on Feb. 6. The new mechanism will help increase market liquidity, ensure bond transaction efficiency and stabilize market operations, Shanghai Securities News reported on Wednesday.
The Shanghai and Shenzhen stock exchanges have joined bond markets around the world in offering the market-making trading mechanism. Bonds have weak liquidity and staggered trading prices. By offering both buy and ask prices, market makers can profit from the spread between them. Through lining up enough buyers and sellers, the middleman is able to ensure that the volume of trades is large enough that investors can offload or snap up bonds quickly at the market maker's price.
"The more volatile the market environment, the more money makers' role in boosting market liquidity and reducing price swings becomes apparent," a trader in the financial market department of a bank said. "Once market sentiment steadies, market makers can sell the bonds they have in hand to other investors at lower valuations."
The jump in bond yields might not have been so high during the market selloff in November last year if market makers had been around to sell orders at once, and in this way avoid the spiraling bond valuations, the person said.
A number of issues, such as how to connect the inter-bank and exchange markets, how to find sufficient funds to undertake market making and how to establish a stable profit model for market makers, urgently need to be addressed in order to further develop China's bond market, the investment banker said.
Market makers need liquidity support, another trader said. When facing a weakening bond market, money makers need a lot of money if they want to stock up on bonds and they may face losses after buying the debt. But a stable return is still achievable as they can pledge the bonds to banks to raise liquidity so long as the financing costs are low, he added.
The market-making mechanism mostly involves bonds and the biggest investors are banks' wealth management funds, an investment banker said, adding that he hopes the business will expand to include more types of debts soon.
Some insurance asset management firms are trying to simultaneously offer buy and sell prices on debt markets to earn profits from the difference. "With stable debts and ample liquidity, insurance funds can also play the role of market makers in the future," an investment manager at an insurance fund said.
Source: Yicai
