The Bangladesh Securities and Exchange Commission has eased a number of conditions including the minimum capital requirement for becoming a market maker for listed securities in the finalised market maker rules.
In the finalised rules, the minimum capital requirement for becoming a market maker has been lowered to Tk 10 crore from Tk 50 crore proposed in the draft rules.
The commission finalised the rules titled Bangladesh Securities and Exchange Commission (Market Maker) Rules, 2017 at the latest commission meeting held on May 9, a BSEC official told New Age on Sunday.
Market makers are entitled to keep prices of shares within a certain range through buying and selling based on fundamentals of companies depending on market situation.
As per the finalised rules, stockbrokers and stock dealers would only be entitled to act as market maker.
A market marker with a paid-up capital of just Tk 10 crore, however, would be allowed to act for the service for only one listed securities.
To be market maker for more than one listed securities, stockbrokers or stock dealers will have to increase their paid-up capital proportionately.
The BSEC in its draft rules had said that an entity with Tk 50-crore capital would be allowed to act as market marker for three authorised securities.
The highest limit for being market marker for a single scrip, however, will remain same as it was drafted.
An entity would be allowed to be market maker for highest five authorised securities at a time.
The commission in the finalised rules also increased short selling limit for a market maker to 30 per cent, meaning that a market maker of a listed securities would be allowed to make 30 per cent short selling of its total sales on a particular securities in a day.
In the draft rules, a market maker was allowed to make highest 20 per cent short selling of its total sales on a particular securities in a day.
Short selling is the sales of shares that are not owned by the seller. The seller can borrow the shares or buy the shares after selling to adjust.
The stock exchanges will set procedures for automatic settlement and execution of short selling of securities that will be done by the market makers.
For short selling of any securities, the sale prices, however, could not be less than the best current asking price on the exchange.
The short selling provision has been included in the market maker rules following proposals from the stakeholders and such provisions are also well established in the developed markets in other countries, a BSEC official said.
The capital market regulator finalised the amendments to the Bangladesh Securities and Exchange Commission (Market Maker) Rules, 2016 on August 2.
The commission has made the amendments as none of the stakeholders in last 16 years expressed interest to be market marker under the existing rules enacted in 2000.
As the market maker rules are vital to make exchange traded funds functional, the market regulator took the initiative to amend the rules and make them viable for entrepreneurs.
In June 2016, the commission finalised the exchange traded fund rules, paving the way for entities like the stock exchanges to run the index-based funds.
Under the amended market maker rules, the commission withdrew the scope for the merchant banks, banks and non-bank financial institutions to act as market maker.
Stockbrokers and stock dealers who are licensed under the Securities and Exchange Commission (stock dealer, stockbroker and authorized participants) Rules, 2000 will be allowed to act as market maker.