There are different sizes of investors and financiers with different needs for financial services on the capital market. These are determinants indicating that the capital market should be a multi-tier marketplace.
The capital market in China has long been abiding by the principle that “the centralised trading market should come first, followed up by the over-the-counter [OTC] market”, and so the number of listed companies on each board reflects an “inverted pyramid” structure.
However, the number of companies listed on the New Third Board has increased four-fold in the past year. The experience of developed countries suggests that the number of companies listed on the OTC market should be significantly higher than that on-floor. The New Third Board, a breakthrough made in China’s multi-tier capital market system, will usher in broader space for development.
Yang Xiaojia, the chairman of National Equities Exchange and Quotations (NEEQ), which operates and manages the New Third Board, has proposed tier management when the number of companies listed on NEEQ reaches between 800 and 1,000. He believes the provision of differentiated services targeted at different companies by means of tier management can effectively retain quality companies.