The meaning of market maker according to the Money market authority establishing law is the person who works to provide the forces of supply and demand for a security or more in accordance with the regulations set by the Money market authority which ensure market stability and achieve its balance, in return, he is allowed to make a profit from price premiums, demoting the commissions and trading fees incurred on it. The market maker is being a competent corporate of financial works, it also may be a broker, and a competent maker of a listed security or more.
According to the executive regulation for Money market authority establishing law, the market maker takes over making an agreement with the stock exchange to determine rights details, obligations, and work terms of market maker.
In RHR for advocacy and legal advices, we will concentrate in this article on market maker’s obligations in accordance with what is stipulated in the Money market authority establishing law and its executive regulation.
Market Maker’s Obligations
– Providing supply and demand on the Security
The executive regulation of the Money market authority establishing law has obliged the market maker of entering buy and sell orders regularly on the security which he is registered on, according to the concluded agreement between him and Kuwait stock exchange for security, by combined prices with a price premium determined by the stock exchange, whereas to modify these orders in accordance with stock price movement, through certain time periods determined by the stock exchange, besides, it obliged him by providing buy and sell orders for a time period determined by the stock exchange.
Also, the market maker is obliged by providing buy and sell orders according to segments determined by the stock exchange, and the concluded agreement between the market maker and the stock exchange, it is also allowed to the stock exchange to determine the percentage of the maximum sale orders from the total value of daily orders for a certain security.
The market maker should oblige by the following buy and sell orders (Bargains), by a turnover not less – in its monthly total – than a certain percentage determined by the stock exchange from the total value of the security trading for same month.
– Generating Liquidity Arising from the Stock Exchange Operations
The market maker should be obliged by providing the minimum rate determined by Kuwait stock exchange for security of cash amounts devoted to market making process along the period of licensing eligibility.
– Presenting a weekly Report to the Money Markets Authority
The executive regulation obliged the market maker of presenting a weekly report to the Money markets authority about the summary of buy and sell process which he took over in every trading session, the average difference between daily buy and sell price, the average value of buy and sell orders entered in each trading session, and the average of orders been executed through the day from the total value of orders.
Also, the market maker is obliged by presenting a list to the authority about the percentage of his ownership for companies’ stocks which he works for as a market maker – weekly – and modifications that arisen to these percentages.
– Cases of Exemption of the Market Maker from His Obligations
It is allowed to exempt the market maker of his obligations of practicing his activity on a certain security in the following cases:
- If the money markets authority decided to modify the premium between supply and demand through the cases of the extreme fraud of market trading.
- If a security trading is suspended.
- If a decision issued by the Money market authority of suspending the market maker of practicing his activity.
- Other cases stated by the Money markets authority, stock exchange or clearing agency.
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To book an appointment or request legal advice about the duties of securities companies in the optimal implementation of clients’ orders, we are pleased to receive your inquiries at (info@Taqneen.com).