What Is an Open Market?

Open market business refers to the activities of the central bank to buy or sell securities, to manipulate the base currency, and to regulate the money supply. Unlike securities trading in general financial institutions, the purpose of central bank buying and selling of securities is not for profit, but to regulate the money supply.

Open market business

Open market business means

Open market operations and others

People's Bank of China Open Market Business

Since the recovery of the open market business,

(1) Pass

In most developed countries, open market operations are the main monetary policy tool for the central bank to handle the base currency and regulate market liquidity. The central bank conducts securities and foreign exchange transactions with designated dealers to achieve the goal of monetary policy regulation. China's open market operations include RMB operations and foreign exchange operations. The open foreign exchange market operation was started in March 1994. The RMB open market operation resumed trading on May 26, 1998, and the scale gradually expanded. Since 1999, open market operations have become an important tool for the daily operation of the People's Bank of China's monetary policy, and have played a positive role in regulating the money supply, regulating the liquidity level of commercial banks, and guiding the trend of money market interest rates.

The People's Bank of China has established a public market business primary dealer system since 1998. It has selected a group of commercial banks that can undertake large bond transactions as the target of open market business. Including 49. These dealers can use Treasury bonds and policy financial bonds as trading tools to conduct open market business with the People's Bank of China. From the perspective of transaction types, the People's Bank of China's open market business bond transactions mainly include repurchase transactions, spot transactions and the issuance of central bank bills. The repurchase transactions are divided into two types: forward repurchase and reverse repurchase. Positive repurchase is the transaction of the People's Bank of China to sell securities to a primary dealer and agreed to buy back securities on a specific date in the future. Repurchase is the operation of the central bank to recover liquidity from the market, while the expiration of the repurchase is the operation of the central bank to put liquidity into the market; reverse repurchase is the People's Bank of China to purchase securities from a primary dealer, and it is agreed to The transaction of selling securities to tier one dealers on the date, reverse repurchase is the operation of the central bank to put liquidity into the market, and maturity of the reverse repurchase is the operation of the central bank to recover liquidity from the market. Cash bond transactions are divided into cash bond buyouts and cash bond sellouts. The former is when the central bank buys bonds directly from the secondary market and puts the base currency at one time; the latter is when the central bank directly sells and holds bonds. Withdraw the base currency. The central bank bills are short-term bonds issued by the People's Bank of China. The central bank can withdraw the base currency by issuing central bank bills. The maturity of central bank bills is reflected in the base currency.

In January 2013, based on the existing monetary policy operation framework and drawing on international experience, the People s Bank of China created a Short-term Liquidity Operations (SLO) as a necessary supplement to the regular operations of the open market. The camera is used when the system fluidity fluctuates temporarily. ^[1]

On January 25, 2019, in order to support banks in issuing perpetual debt supplementary capital, the People's Bank of China decided to create a Central Bank Bills Swap (CBS). ^[2]