Who is a market maker?
The main goal of MM is to maintain the liquidity of exchange-traded instruments and the ability to trade them. It is the MM that enables you to conduct transactions at an adequate price in reasonable time intervals. Thus, the MM forms and maintains the liquidity of the on-exchange market providing trading participants with the opportunity to conduct transactions rather promptly.
Generally, there are the following main responsibilities of MM:
- maintaining quotes in a certain range;
- providing additional liquidity as required;
- preventing price gaps.
A trading participant can be a MM for one or several financial instruments. The number of MMs for a specific financial instrument may be limited by BCSE.
The operating procedure of MMs, their rights and obligations, specifics of making and executing transactions are determined by the BCSE Regulations on Market-Makers of the Currency Market and other BCSE local legal acts (LLA).
In accordance with the BCSE local legal acts or agreements with MMs, other requirements can be applied to admission to trading, types and amounts of contributions, fees and other payments, grounds for imposing restrictions on admission to trading, suspension and termination admission to trading, as well as other conditions of their participation in trading, clearing and settlements upon transactions made by MMs.
Obtaining the market maker status
To obtain the MM status, a trading participant shall submit an application to BCSE in the prescribed form (Appendix 1 to the BCSE Regulations on Market Makers of the Currency Market).
Applications are considered within 3 working days from the date of its receipt by BCSE. Based on the results of consideration, BCSE decides to grant (or to refuse to) the MM status to the trading participant.
In case of a positive decision, the market maker status is granted to a trader from the first day of the month following the month of the decision.
To fulfill the MM duties, it is necessary:
- to submit bids addressed to all trade participants;
- to maintain a two-way quotation during the trading session;
- to ensure the minimum admissible total volume of two-way quotes for a financial instrument (set by BCSE LLA) during the trading session;
- to establish and maintain the spread of a two-way quotation for a financial instrument during the trading session at a level not exceeding the value set by the BCSE LLA;
- to respect the total duration of time intervals during the trading session to maintain two-way quotes for a financial instrument in accordance with the BCSE LLA;
- to fulfill obligations on a financial instrument not less than the number of trading days established by the BCSE LLA.