MUSCAT, JULY 15
Executive regulations governing the operations of Market Makers and Liquidity Providers – an initiative designed to energize trading activity and create market depth – were published by the Muscat Stock Exchange (MSX) last week.
They came into force on June 12, 2023 via a resolution issued by Mohammed Mahfoudh al Ardhi, Chairman of the Board of Directors of MSX.
With their issuance, the first of six ground-breaking initiatives outlined by the MSX last month has now come into effect. The remaining five – slated for roll-out in the coming months – pertain to: Securities Lending and Borrowing, Pooled Trading Accounts, Promising Companies, Tripartite Governance, and Liquidity Fund.
On the heels of their issuance last month, the first Market Making & Liquidity Providing license was issued by the Capital Market Authority (CMA) to well-known Omani investment services firm Ubhar Capital. Other applications are currently under consideration, it is learnt.
Market Making, as defined by the new regulations, is an “activity aimed at providing continuous orders for supply and demand for eligible securities during the trading session with the aim of promoting liquidity”.
Liquidity Provision, on the other hand, is defined as a “financial service that the market maker commits to in order to improve liquidity of one or more securities listed on the MSX under a contract with the issuing entity”.
Significantly, market making and liquidity provision activities are limited to entities operating in the securities sector and licensed by the CMA to do so. Licenses to operate as market makers and liquidity providers are valid for one year against a fee of RO 10,000 for Market Makers and RO 1,000 for Liquidity Providers.
As a safeguard against potential conflict of interest and irregular trading activities, the regulations also mandate market makers to operate independently from their other business units. It explained: “The market maker must separate the market making, liquidity provision, the trading floor and the employees of the activity from other activities. The separation requirements include, for example, digital and physical records, bank accounts and trading account. Access to the activity offices is limited to authorized employees only.”
Seeking to support the Market Making and Liquidity Provision initiative, Oman Investment Authority (OIA) – which owns the Omani bourse – also recently announced an allocation of RO 100 million into a liquidity fund established in cooperation the National Programme for Financial Sustainability and Financial Sector Development. The new fund has been described as a portfolio into which a percentage of the daily trading volume on the stock exchange will accrue.
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