Finally, Saudi capital market market makers are coming

Finally, Saudi capital market market makers are coming

Tadawul’s announcement a few days ago confirming that they are in the final stages of testing a market maker mechanism is great news for the investment community in the Saudi capital market. Obviously, this in line with the Vision 2030 to develop and support the performance of the private sector through the stock market.

As we all know, market makers play an important role in improving market liquidity and the smooth flow of financial markets, especially those with low volume such as the Nomu market.

When BMG Financial Group participated as an advisor and arranger in one of the companies included in the Nomu market launch over a year ago, we hoped to have a market maker to create the liquidity and price benchmark for market players, especially in new products or low-trading products such as Nomu.

Market makers must maintain bid and ask prices for specific stocks or other securities and assets continuously on screen under defined and publicly available conditions. In exchange, he may receive benefits such as reduced transaction costs, increased trading technology capability, and monetary compensation.

In my opinion, the introduction of market makers in the Saudi capital market will have a noticeable positive effect on improving initial public offering (IPO) subscriptions, especially to be listed on the newly introduced Nomu market.

Basil MK Al-Ghalayini

By introducing this, investors and traders in the Saudi market could buy and sell easily. Thus, market makers can create the initial liquidity and transparency needed to attract more market participants. New investors then attract others until the maximum potential liquidity and transparency for the products concerned is reached.

In this context, market makers act as mechanisms to concentrate trading, improve transparency and enhance market activity. They constantly react to changes in market participants’ appetite to trade at different prices over time. Their presence will bring several benefits, such as growth in trading volume and an apparent reduction in volatility and liquidity risk to a level similar to that of larger and more liquid stocks on the exchange.

In my opinion, the introduction of market makers in the Saudi capital market will have a noticeable positive effect on improving initial public offering (IPO) subscriptions, especially to be listed on the newly introduced Nomu market. Thus, these small and medium enterprises (SMEs) will achieve their growth and strategic expansions.

SMEs will be able to secure their capital increases via these IPOs supported by market makers. As a result, we will see a sustained increase in the contribution of the private sector to the Saudi economy.

• Basil MK Al-Ghalayini is the Chairman and CEO of BMG Financial Group.

Disclaimer: The opinions expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News

Comments are closed.