CMA approves amendments to market maker mechanism to boost liquidity, pricing efficiency
Amendments shorten re-registration period and introduce tiered fees for market makers; strengthen investor confidence
- LB1 tier: 30% discount for securities with 5–15% of monthly trading volume
- LB2–LB5 tiers: 30% discount for 10–15%, 60% discount for 15–30%, and 90% discount for over 30% of total monthly trades
In a strategic move to enhance market efficiency and liquidity, the Capital Markets Authority (CMA), in coordination with the Kuwait Stock Exchange (KSE), has approved amendments to the market maker mechanism.
The reform aims to improve pricing fairness, boost trading activity, and increase the market’s attractiveness to both local and foreign investors, according to an informed source.
The amendments follow a comprehensive review of prior market maker practices, including consultations with investment companies providing market maker services. Key changes include shortening the prohibition period for re-registration from one year to three months, reports Al-Rai daily.
This allows market makers to reassess securities more frequently, reflecting the dynamic nature of trading activity while maintaining market stability.
The CMA has introduced a tiered system for fees and commission discounts based on liquidity levels, linking financial incentives directly to trading performance:
LB1 tier: 30% discount for securities with 5–15% of monthly trading volume
LB2–LB5 tiers: 30% discount for 10–15%, 60% discount for 15–30%, and 90% discount for over 30% of total monthly trades
This structure ensures that highly active securities benefit from reduced financial burdens on market makers, while maintaining continuous and effective pricing within approved limits.
Securities can be reclassified periodically based on liquidity performance, ensuring flexibility and operational justification.
The amendments are designed to strengthen the role of market makers in stabilizing prices, reducing volatility, and improving investor confidence. Market makers will have greater flexibility with large-cap stocks, encouraging smoother trading and active participation.
The reforms are part of a broader financial market development strategy, which includes updating regulatory frameworks, expanding investment instruments, and creating conditions for introducing new financial products.
Continuous monitoring and evaluation will ensure that the mechanism meets its objectives in enhancing liquidity, stabilizing prices, and sustaining market efficiency.
