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Functions of stock exchanges

Functions of stock exchanges

 A place for securities transactions A stock exchange provides a place for securities buyers and sellers to conduct centralized securities transactions, which embodies the supply and demand relationship of securities and ensures the continuous conduct of securities transactions. The securities of the stock exchange have the characteristics of large trading volume, frequent trading, a small gap between incoming and outgoing quotations, small price fluctuations, and rapid transaction completion, creating a market with high liquidity, high efficiency, and continuity.

 (2) Forming a more reasonable price Neither the stock exchange nor the members of the exchange have the right to decide the transaction price. The securities trading price in the exchange is formed by the centralized public bidding of buyers and sellers under the condition of full competition. It is not only the result of the public bidding of both parties in the trading hall, but also the communication network connecting the commissioned trading outlets to comprehensively report the market conditions. result. Because it is a price formed by public bidding, it can not only reflect the relationship between supply and demand but also reflect the real investment value of securities. It is the equilibrium price generated by the market.

 (3) Guide the rational flow of social funds and the rational allocation of resources. Securities listed on the stock exchange have been approved by the competent authorities, and listed companies must disclose their operating and financial status. Therefore, the price and trading volume of securities transactions are actually It is the market’s evaluation of the security. The exchange publishes its market changes every day, reflecting the profitability and development potential of listed companies, allowing investors to choose investment directions. Changes in securities prices can automatically adjust the flow of social funds, prompting social funds to flow in the direction of need and benefit.

 (4) Predicting and reflecting economic dynamics Changes in securities prices are affected by various factors such as the profit prospects of enterprises, and the quality of the trading market reflects the changes in these factors from the side. Since the stock price cycle generally precedes the business cycle, the volatility of securities prices often becomes a precursor to changes in the economic cycle and a barometer of social and economic activities. Through changes in securities prices, it is possible to predict the economic dynamics of enterprises, production sectors, and the development of the entire social economy.

 In addition, the stock exchange also has the following functions: providing rich and timely information on the securities market, low transaction costs, managing securities firms, maintaining the good order of transactions, preventing and punishing insider trading, fraud, manipulation, etc., and setting up liquidation Institutions guarantee delivery of securities, etc.

 (2) OTC market

 1. Definition and characteristics of

 the OTC market is a general term for securities trading markets other than stock exchanges. In countries with developed securities markets, the trading volume of securities far exceeds the trading volume of stock exchanges and occupies an extremely important position in the securities trading market.

 Before the separation of the banking and securities industries in the early days, because the stock exchange had not yet been established and perfected, many securities transactions were conducted through banks, and investors bought and sold securities directly on the bank counter, which is called over-the-counter trading. After the implementation of the separation system, this kind of over-the-counter securities transactions are transferred to securities companies, so some people call it the over-the-counter market or the store market, or the OTC market for short (over-the-counter market). With the development of communication technology, many over-the-counter markets are not directly conducted in front of securities companies’ counters but are conducted by customers and securities companies through telephone, fax, and computer networks, so they are also called telephone markets. Since the securities that enter the exchange must meet certain listing standards, they must go through the members of the exchange to buy and sell. For this reason, a certain amount of commission must be paid to the members. To avoid stricter legal conditions and reduce transaction costs, the Demand for over-the-counter transactions.

 Compared with the stock exchange, the OTC market mainly has the following characteristics:

 (1) The OTC market is a decentralized and invisible market with no fixed trading venue. It has neither a fixed, centralized trading place, nor a unified trading time and trading regulations, but is traded by many independently operated securities business institutions, and mainly relies on telephone, telegram, fax, and computer network.

 (2) The over-the-counter market is an “open” market in which investors can directly participate in the securities trading process, and its organization adopts the market maker system. The biggest difference between the OTC market and the stock exchange is that it does not use a brokerage system, and investors can directly trade with securities dealers. Securities transactions are usually conducted directly between securities operating institutions or between securities operating institutions and investors, without the need for intermediaries. In over-the-counter securities trading, securities operating institutions first advance funds to buy several securities as inventory and then start listing them for external trading. They buy at a lower price and sell at a slightly higher price, earning the difference, but their markup is generally limited. Securities dealers are not only direct participants in transactions, but also market organizers. They create opportunities for securities transactions and organize market activities to maintain market liquidity and meet the investment needs of public investors. Therefore, securities dealers are called “market makers”, and the organizational form of OTC trading is also called the market maker system.

 (3) The over-the-counter market is a market with many types of securities and securities operating institutions, mainly based on the beneficiary certificates of stocks, bonds, and open-end funds that have not been approved for listing on the stock exchange. Due to the variety of securities, there are correspondingly many securities dealers dealing with different securities.

 (4) The OTC market is a market-driven by traders’ quotations. on the over-the-counter market. The buying or selling of securities adopts a “one-to-one” transaction method, so many buyers or sellers can’t appear in the buying and selling of the same securities at the same time, and there is no competitive asking price and quotation mechanism. Therefore, the trading price of securities in the over-the-counter market is not determined by bidding but is formed by securities companies listing the buying and selling prices of the same securities at the same time, and adjusting them according to whether investors accept them or not.

 (5) The management of the OTC market is relatively loose. The OTC market is scattered, lacks a unified organization and charter, is difficult to manage and supervise, and its transaction efficiency is not as good as that of the exchange market. However, the NASDAQ market in the United States uses computers to connect the OTC markets scattered across the country into a network, which greatly improves management and efficiency.

 2. Functions of the OTC market

 (1) The OTC market is an important place for securities issuance. The issuance time of new securities is concentrated and the quantity is large, which requires numerous sales outlets and flexible trading hours. The over-the-counter market is an extensive intangible market that can meet the requirements of securities issuance, which can not only facilitate investors to purchase but also accelerate the issuance of securities and reduce the risk of underwriters. For example, the issuance of securities in the United States is mainly carried out through the over-the-counter market, and my country’s certificate-type treasury bonds are also issued in the over-the-counter market.

 (2) The over-the-counter market provides opportunities for circulation and transfer of issued but unlisted securities. The over-the-counter market is the main place for the transfer of government bonds, local government bonds, and corporate bonds; The stocks of emerging companies and small companies with limited conditions provide a channel for trading; provide opportunities for the realization of stocks that are difficult to operate, fall in stock price, and have been terminated from trading; provide channels for subscription and redemption for open-ended investment funds.

 (3) The OTC market is a necessary supplement to the stock exchange and an important part of the secondary market. The stock exchange has strict listing standards, and many securities that do not meet the listing standards also need to be circulated and changed hands objectively, and there needs to be a trading venue where they can be bought and sold; the stock exchange has certain requirements on the number or duration of listed securities, and the issuance volume Securities that are too small and have a short term are difficult to trade continuously and will increase transaction costs. The over-the-counter market is not limited by the number and term of securities; the stock exchange adopts a brokerage system and has strict trading hours, and the trading procedures are more complicated. The management is strict, the trading hours of the OTC market are flexible and scattered, the trading method is simple and convenient, and there are few restrictions on investors, which meets the needs of some investors. Therefore, the OTC market makes up for the shortcomings of the stock exchange in terms of the type, quantity, transaction method, and transaction time of the securities traded, and together with the stock exchange, it constitutes a securities trading market.

 (3) The third market

 The third market refers to the securities trading market that is registered and listed on the stock exchange but traded over the counter. Originally part of the over-the-counter market, this market has grown in status in recent years due to increased trading volumes, so much so that many people think it should be treated as a separate market. But strictly speaking, the tertiary market is part of the over-the-counter market, which is actually an over-the-counter market for listed securities.

 The third market emerged in the United States in the 1960s, mainly because the securities market in the United States adopted a fixed commission system. It is especially disadvantageous for large investors (mainly institutional investors such as bank trust departments and mutual funds) due to the high cost of securities transactions in the stock exchange and the difficulty of timely transfer. To reduce transaction costs and meet the needs of various customers to buy and sell securities, there has been a channel for listed stocks to be traded outside the exchange by brokers who are not members of the exchange. The main participants in the transaction are bank trust departments, insurance companies, mutual assistance Financial institutions such as savings institutions, pension funds, mutual funds, large securities brokers, and other large investors.

 The third market has emerged and developed rapidly in the United States. This phenomenon reflects the important changes in the U.S. securities market since the 1960s. It is mainly reflected in two aspects: first, securities transactions have become increasingly decentralized, transaction forms have become increasingly diversified, and turnover has increased. The continuous expansion has changed the previous centralization of stock exchanges and the monopoly of securities transactions by member brokers. Second, the status of institutional investors in the securities market is increasing day by day. Various investment companies, annual foundations, insurance companies, and other professional financial institutions have purchased and held securities in large quantities, and their investment proportion has increased significantly. According to statistics, various groups in the United States have The shares held by investors accounted for more than half of the issued shares, and the number of shares involved in transactions accounted for more than 60% of the total trading volume.

 The transaction characteristics of the third market are that the commission is cheap and the cost is low; the price and commission are negotiated by both parties, and a better transaction price can often be obtained; the transaction procedures are simple and the transaction can be quickly concluded.

 The emergence of the third market makes the securities market form a multi-level trading situation, strengthens the competition in the securities business, and prompts the stock exchange to take corresponding measures to attract customers. Some old-fashioned exchanges such as the New York Stock Exchange in the United States have changed the practice of charging a certain percentage of the securities transaction volume in the past, and the commission is charged by negotiation between buyers and sellers; in addition, there are also free securities research and other services for customers. service, which is conducive to the reduction of investors’ transaction costs and the improvement of investment efficiency.

 (4) Fourth market

 The fourth market refers to the over-the-counter market in which securities transactions are not conducted through brokers, but directly through electronic computer networks for bulk securities transactions. This is a form of over-the-counter trading that has emerged in the United States in recent years.

 The fourth market is actually a large-scale securities exchange communication network, sometimes an electronic computer network, sometimes just a few people, whose main job is to inform customers of buyer or seller intentions, to facilitate direct transaction negotiations between buyers and sellers. The fourth market usually involves only buyers and sellers, although sometimes there is a third party who helps arrange the transaction, he is not directly involved in the transaction process. Brokers in the fourth market do not need to register with the relevant government authorities, do not disclose their transactions, and have lower commissions than other markets. In recent years, the transfer of legal person shares of private placement companies in our country has similarities with the fourth market in terms of its transaction methods, but it is not the same in terms of its causes.

 The advantages of this transaction form of the fourth market are: First, the transaction cost is low. Because buyers and sellers trade directly without intermediaries, even if they sometimes need to be arranged through a third party, the commission is much lower than in other markets; secondly, because buyers and sellers negotiate directly, it is expected to obtain a price that both parties are satisfied with and complete the transaction. Speedy; third, the transaction does not need to be reported publicly, which is conducive to maintaining the confidentiality of the transaction; fourth, it does not impact the securities market. The fourth market generally conducts large-scale securities transactions. If it is publicly traded on the stock exchange or the store market, it may have a greater impact on the price of the securities market. However, in the fourth market, there is no public bidding. , to avoid pressure on the stock market. It is precise because of these advantages of the fourth market that the development of this market has great potential.

 Of course, the fourth market also has its negative side, which will bring great difficulties to financial management. It is difficult to obtain even the statistical data of buying and selling transactions, and it is even more difficult to manage and supervise such transactions or formulate a code of conduct. Therefore, the existence and development of the fourth market also pose a challenge to the management of the securities market.

3. The Second Securities Market and the Establishment of China’s Growth Enterprise Market   

 (1) Second Securities Market and Its Characteristics

 1. The meaning of the second board market of securities The second

 board market is relative to the mainboard market and refers to a new market that provides financing channels for small and medium-sized enterprises and emerging companies outside the mainboard market. As a new type of market emerging in recent years, the second board market is fundamentally different from the main board market in its different listing standards, and most of the listed objects are emerging small and medium-sized enterprises with potential growth. Therefore, the second board market is also known as the GEM market, The small company market or the emerging company market, etc., my country’s upcoming second board market is called the GEM market.

 2. The characteristics of the second board market

 of securities, Most of the mature securities markets in the world have a second board market. The NASDAQ (Nasdaq) market in the United States is the originator of the second board market. The second board markets in other countries basically use NASDAQ for reference. established by the market. Therefore, the second board market has common characteristics, which are embodied as follows:

 First, in terms of service objects, the second board market is mainly a market for emerging high-tech companies, which meets the needs of small and medium-sized enterprises that carry out high-tech and high-risk investments. financing needs.

 Second, in terms of listing standards, due to the characteristics of high-tech companies, their listing requirements are relatively low. For example, the requirements for listed companies’ operating performance levels and asset scales are significantly lower than those of the main board market.

 Third, in terms of trading methods, the second board market can either follow the trading model of the mainboard market and conduct transactions through the stock exchange, or it can have no trading floor or fixed location, rely entirely on the computer network trading system, and follow the over-the-counter market method. Trading.

 Fourth, in terms of investor composition, due to the high transaction risk of the second board market, it is generally not appropriate to become a mass-market open to all investors, but professional institutional investors are the main participants, while individual investors Investment funds indirectly participate in the second board market.

 Fifth, in terms of supervision and management, due to the small scale, short establishment time, and low-performance requirements of companies listed on the second board market, the investment risks and transaction risks of the second board market are greater than those of the main board market. Information disclosure and other requirements are more stringent.

 3. The comparison between

 the second board market and the main board market of securities The second board market and the main board market are both securities trading markets, providing a place for trading issued stocks or other securities, but the second board market is based on the mainboard market reaching a certain degree of development. The stocks generated and listed on the second board market can be transferred to the main board market for trading. The two are closely related and have obvious differences.

 (1) Differences in market positioning and listing standards

 From the NASDAQ market in the United States to the AIM market in the United Kingdom, the SESDAQ market in Singapore, and the ChiNext market in Hong Kong, their market positioning is based on the market theme of “development potential”, and the service targets are growth, Small and medium-sized enterprises or small and medium-sized technology enterprises with promising development prospects have lower requirements for listing scale, past performance, and several shareholders than the main board market; while the main board market mainly serves larger enterprises and basic industries, and the listing standards are relatively low. Strict and demanding.

 (2) Differences in the overall risk of listed companies

 Emerging technology companies have weak foundations, and most of them seek development in some areas that are still under development. In the process of product development and market development, they are more likely to suffer failure. In the second board market that serves such companies, its overall risk is naturally higher than that of the main board market. It is a high risk that the second board market must be largely independent of the main board market.

 (3) Differences in market investment entities

 For investors participating in the second board market, they are mainly aimed at those investors who can make a thorough and objective evaluation of the company’s business situation and the risks involved, that is, institutional investors and investors. Individual investors who fully understand the market prevent investors who do not understand the market from blindly investing in the second board market and causing losses. For this reason, market investors are restricted by measures such as increasing the number of funds entering the market, the minimum transaction amount, and restricting investor status. , while the motherboard market generally does not put more energy in this regard.

 (4) Differences in information disclosure systems

 As there are many uncertain factors for companies listed on the second board market, countries that have opened the second board market require that, in addition to information disclosure by the mainboard listing rules, company information should be disclosed. More detailed, sufficient, and timely disclosure, such as the requirement to disclose quarterly reports, business activities and business objective statements, etc. Therefore, the information disclosure of the second board market is more comprehensive and strict than that of the main board market.

 (5) Differences in the responsibilities of listed sponsors The

 securities regulatory authorities have stricter requirements for sponsors in the second board market than in the mainboard market. It is necessary to ensure that the company applying for listing fully complies with the listing regulations of the second board market, and to ensure that the company is responsible for all major issues and necessary. The information is fully disclosed, the listing sponsor retains longer than the listing recommender, and the responsibility for grasping the quality of the listed company is mainly handed over to the listing sponsor. The responsibility of the recommender of a listed company on the main board market lies more in the process of stock issuance and listing.

 (2) Introduction to NASDAQ Market

 Since the 1970s, with the development of the world economy, the securities markets of various countries have undergone significant changes. The second board market, as an emerging securities market corresponding to the mainboard market, has flourished in various countries, such as the NASDAQ market in the United States and the AIM market in the United Kingdom. , European EASDAQ market, Singapore SESDAQ market, Taiwan filing market, Hong Kong ChiNext market, etc. Among them, the NASDAQ market in the United States is the most successful.

 The full name of the NASDAQ market is the National Association of Securities Dealers Automated Quotations. Founded in 1971, it is the fastest-growing market in the United States and the first electronic stock market in the world. It lies in the use of modern electronic information technology to establish its own trading system. In October 1998, NASDAQ and the American Stock Exchange (AMEX) merged to form the NASDAQ AMEX Market Group, which formed the world’s most advanced and the world’s largest invisible trading market.

 As a market group, NASDAQ has members including all brokers and securities dealers operating open market businesses in the United States, and has two subsidiaries, namely NASDAQ Management Co., Ltd., and NASDAQ Stock Market Co., Ltd. NASDAQ formulates overall development strategies and policies for the group, and supervises the operation of the two subsidiaries to ensure the improvement of internal regulations and self-management systems of the group; To maximize profits and protect investors by managing the securities market; NASDAQ Stock Market Co., Ltd. is authorized by NASDAQ to undertake the task of developing, operating and maintaining the trading system, improving services and trading varieties, and formulating management policies. and listing standards. In addition, NASDAQ also established NASDAQ International Limited Liability Company, which is located in London, England, to help non-US companies list on NASDAQ. The NASDAQ market itself is divided into two parts: the NASDAQ national market and the NASDAQ small capital market. Typically, securities of companies of a certain size are traded on the NASDAQ National Market, while securities of smaller emerging companies are traded on the Small Cap Market.

 The NASDAQ market in the United States can become the largest and most influential second-board market in the world. These successful experiences are mainly manifested as:

 First, a relaxed listing environment. The NASDAQ market is specially set up for small and medium-sized enterprises in the start-up period. Therefore, the listing conditions should be formulated by the specific conditions of these enterprises, not focusing on the past business records, operating performance, capital scale, and other conditions of the enterprises, but focusing on the enterprises. Whether there is development potential or the possibility of success, therefore, the listing conditions should be different from the main board market, lowering the listing standards, and at the same time enhancing the responsibilities of the listing sponsor.

 Second, a strict information disclosure system. NASDAQ is not only a listing place for venture companies but also an investment place for venture investors. Investors invest in the high-risk second-board market to obtain high returns. For NASDAQ, listed companies must be required to provide the market with real, timely, and effective information, so that investors can have a clear understanding of it. Therefore, NASDAQ has strict requirements on the information disclosure of listed companies.

 Third, a successful trading system. NASDAQ is a dealer market and implements a market maker system. There are multiple specialized dealers for each stock in the market. The dealer first buys the commission from the broker, then sells the stock through electronic quotation, and finally concludes the transaction. This trading system gives great power to brokers and traders, promotes active market transactions, enhances the liquidity of listed stocks, and provides a good external environment for the development of new high-tech enterprises.

 Fourth, an advanced trading system. The NASDAQ market is not only a concentration of high-tech enterprises, it is itself a high-tech enterprise. The NASDAQ market is a completely electronic trading market, which uses the most advanced communication technology to transmit quotation information to more than 20,000 terminals in the United States. It has the most advanced electronic trading system to ensure the efficiency and accuracy of each transaction and the interests of investors.

 (3) Establishment of China’s Growth Enterprise Market

 1. The Significance of Establishing Growth Enterprise Market in my country

 A mature and developed securities market should be a multi-level securities market system including the mainboard market, the second board market, and the over-the-counter market. needs of investors. However, my country’s current single market system dominated by the mainboard market is increasingly showing its limitations. To meet the needs of my country’s economic development, the securities market should be established into a multi-level market system. The establishment of the ChiNext market will greatly change the structure of my country’s securities market and bring about a qualitative leap in the development of China’s securities market.

 First, the ChiNext market is an objective need for small and medium-sized technology companies to raise funds. my country’s current enterprise structure and investment and financing system have led to the lack of necessary financial support for small and medium-sized technology enterprises. On the one hand, most financial institutions lend to large and medium-sized state-owned enterprises, and there is credit discrimination against small and medium-sized enterprises in the system; On hand, the current loan system requires corresponding property mortgage capabilities or sufficient guarantees, while small and medium-sized technology enterprises neither have enough properties to mortgage, nor can they find a guarantor for themselves, and it is difficult to obtain financial support through indirect financing channels. At the same time, financing through the mainboard market is also strictly restricted by the size of the listed company, the minimum public float, continuous operation, and profit records, and it is difficult to raise funds in the stock market. Through the establishment of the ChiNext market, the capital needs of such enterprises have been met, and development opportunities have been provided for small and medium-sized technology enterprises.

 Second, the Growth Enterprise Market is an objective need to regulate the operation of high-tech enterprises. For companies that have already been listed, the supervision of listed companies can be strengthened through the constraints of stock trading rules, and the transparency of the operation of listed companies can be improved, thereby promoting high-tech enterprises to establish a scientific and reasonable management system by strict standards. At the same time, it can effectively solve the problems of risk dispersion and compensation through the capital market, and strongly support the development of high-tech enterprises in terms of capital and management system, so that high-tech emerging enterprises can grow rapidly and form an important supporting force for the national economy.

 Third, the GEM market is an objective need to optimize the allocation of social resources. The establishment of the ChiNext market enables a large number of small and medium-sized high-tech enterprises to become listed companies. On the one hand, it can guide enterprises and individuals to invest in high-tech industries, so that social funds flow to emerging high-tech enterprises that need funds; on the other hand, through the capital market and venture capital funds, etc. Form to guide the flow of funds to high-tech enterprises. Through the guiding role of the ChiNext market, the optimal allocation of social resources can be effectively achieved, which is of great significance to promoting the long-term sustainable development of the economy.

 Fourth, the ChiNext market is an objective need for the formation of an “exit mechanism” for venture capital. From the perspective of the development of the high-tech industry in the United States, its success is mainly the result of the combined effect of three elements: product research and development, venture capital funds, and the stock market. Venture capital funds have played a pivotal role in promoting the development of high-tech industries. However, the investment purpose of venture capital funds is not to hold shares, but to obtain part of the equity through capital and technical assistance to promote the development of the funded company and increase capital appreciation. Due to the high risk, small scale, and short establishment time of high-tech enterprises, it is generally difficult to enter the main board market of securities. The establishment of the Growth Enterprise Market has lowered the standards for listing enterprises, thus providing a place for the realization and withdrawal of venture capital funds, enabling venture capital companies to recover funds to invest in new projects, and enabling high-tech enterprises to obtain new huge financing channels.

 2. The positioning of China’s establishment of the ChiNext market

 From the perspective of the second board market that has been established internationally, although the second board market in each country has its own characteristics in system design, the original intention of their establishment is for the development of emerging small and medium-sized enterprises, especially high-tech enterprises. . Therefore, my country’s upcoming GEM market should also serve small and medium-sized enterprises, especially small and medium-sized high-tech enterprises. Because emerging small and medium-sized enterprises are the most active, fastest-growing, and most promising part of the national economy, and quite a few are pioneers in emerging industries, their entrepreneurial risks are very high, and the survival rate of emerging high-tech enterprises is particularly low. Low, traditional financing channels cannot meet and are not suitable for the needs of such enterprises. Therefore, my country’s GEM market should be positioned to serve small and medium-sized enterprises, especially small and medium-sized high-tech enterprises.

 The second board market established in my country is called the “GEM market”. In addition to serving high-tech enterprises, it also meets the needs of my country’s new economic development, including not only those high-tech industries dominated by electronic information, biomedicine, new materials, environmental protection, etc., and should also include enterprises with high-tech content after using high-tech to transform traditional industries. Among them, small and medium-sized enterprises should be able to list on the Growth Enterprise Market as long as their products have good sales, high economic benefits, great development potential, and strong growth potential. Market listing. my country is currently vigorously supporting and developing the non-state-owned economy. Therefore, my country’s private enterprises, especially private small and medium-sized enterprises, may be an important main body of the GEM market.

 3. Basic Principles for Establishing the Growth Enterprise Market in China

 Based on the differences in many characteristics between the Growth Enterprise Market and the Main Board, the establishment of the Growth Enterprise Market should follow the following principles:

 First, the theme of the Growth Enterprise Market’s positioning of “development potential” must be clear and run through the market. Everything is working. The GEM market is most concerned about whether it can successfully attract small and medium-sized enterprises with development potential and room for growth. The listing mechanism should be low-cost, high-efficiency, flexible, and convenient.

 Second, the ChiNext market should be a market with moderate intervention. Since the ChiNext market is positioned as “development potential”, this itself means that high returns and high risks coexist. To protect investors’ enthusiasm for the ChiNext market, market organizers and regulators must strike an appropriate balance between strict supervision of listed companies, market supervision and market risk control, and maintaining a fair and efficient market. and transparent market order.

 Third, obvious risk warnings should be part of the principle of protecting the interests of investors. From a global perspective, one of the common denominators of successful securities markets is to protect the interests of investors and maintain their enthusiasm for the securities market, especially since small and medium-sized investors are inherently vulnerable groups in the securities market. Larger, so small, and medium investors will face a more unfavorable investment environment. In the ChiNext market, when investors’ investment concepts are still immature and risk awareness is generally insufficient, obvious risk warnings have become part of the principle of protecting investors’ interests.

 Fourth, the GEM market must implement a stricter and more effective information disclosure system than the main board market. The products of high-tech enterprises have great market uncertainty, and the market risk increases accordingly, and the GEM market has relaxed listing conditions and lowered entry barriers, so the information disclosure of companies listed on the GEM market must be more truthful, comprehensive, and timely.

 Since the “Decision of the Central Committee of the Communist Party of China and the State Council on Strengthening Technological Innovation, Developing High Technology, and Realizing Modern Industry” in 1999 proposed the establishment of a high-tech board, the Shenzhen Stock Exchange began to prepare for the ChiNext market. However, the bursting of the global Internet economic bubble has led to a major adjustment in the market layout. At the beginning of 2004, the “Several Opinions of the State Council on Promoting the Reform, Opening-up and Stable Development of the Capital Market” proposed to “promote the construction of the ChiNext market step by step”. According to this strategic arrangement, the SME sector operates relatively independently within the framework of the main board market, and gradually promotes institutional innovation, marking a substantial step in the step-by-step advancement of the construction of the ChiNext market.

 The small and medium-sized enterprise sector currently established on the Shenzhen Stock Exchange follows the principles of two unchanged and four independent, that is, on the premise that the current laws and regulations and the standards for issuance and listing remain unchanged, an operation established on the main board of the Shenzhen Stock Exchange will be established. Independent, monitoring independent, code independent, index independent sector. The difference between the ChiNext and the SME board is that firstly, the SME board has a higher entry threshold and stricter listing conditions, while the GEM board has a lower entry threshold and more relaxed listing conditions; second, the operation of the SME board is independent. The subsidiary market model, that is, the SME sector is attached to the Shenzhen Stock Exchange; thirdly, from the chronological order of establishment, the SME sector precedes the ChiNext, in other words, the SME sector is the prototype of the future ChiNext.

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