Kuwait Financial Centre “Markaz” announced its successful participation in the ‘Market Maker’ seminar, organized and led by Boursa Kuwait on 26 September, 2022 at the Al Kharafi Hall, Boursa Kuwait headquarters. Mr. Fahad S. Al-Rushaid, Vice President – MENA Equities, represented Markaz and was joined by Mr. Sulaiman Al Musallam, Assistant Senior Manager, Market Maker Department in the Asset Management Sector at Kuwait Investment Company. The event was moderated by Mr. Bader Al Nesef, Assistant Director – Institutional Investor Affairs, at Boursa Kuwait. Markaz’s participation in the seminar reinforces its position as one of Kuwait’s leading financial institutions that plays a major role in raising awareness among market participants and encouraging the adoption of international best practices and developing new operational tools, while giving innovation and leadership in the field of financial services a new definition.
During the seminar, Al-Rushaid addressed the impact of liquidity on stock value of listed companies, highlighting its contribution to higher company ratings, reduction of costs incurred by the investor in the event of purchase or exit, and reduction of volatility by closing the gaps in the orders, making stock more attractive and reflecting its true value. Adequate liquidity also helps reduce the company’s borrowing cost, diversifies the investor base, and provides an opportunity to enter the emerging market indices.
Al-Rushaid also touched on how a Market Maker guarantees the provision of liquidity on the stock, clarifying that the market maker is mandated by the exchange to trade at least 10% of the stock’s overall trades, in addition to providing bids and asks within a certain framework, according to the liquidity bucket the stock is in. Moreover; the exchange requires Market Makers to assign accredited system providers, in order to ensure that it performs these specific tasks. It is also a requirement that the trader has marked at least 5 years of trading experience.
Al-Rushaid shed light on the demand for cooperation with the Market Maker by companies that qualify for the first market, knowing it provides an opportunity for companies to reach the first market or to maintain a steady presence in the first market.
In response to a question about the cases in which the Market Maker faces difficulties in providing liquidity, Al-Rushaid said that the most prominent of them is the lack of liquidity on certain shares, in which case the solution lies in lending the Market Maker the company’s shares, or registering more than one Market Maker on the stock. He added that it is very difficult to source liquidity from scratch, however; trading can be revitalized by filling the order books with bids and asks, in addition to the presence of borrowed shares with the Market Maker, which can contribute to increasing liquidity on passive shares.
In 2020, Markaz announced that it was approved officially to operate as Market Maker in the Kuwait capital market, making it one of the first companies in Kuwait to take on this role. Reflecting its commitment to supporting the development of the Kuwait market and reinforcing its credibility amongst its clients and stakeholders, to date Markaz has been appointed as market maker for each of Boursa Kuwait, Al Eid Food Company, Gulf Cable and Electrical Industries Company “Cable”, Kuwait Real Estate Co., Combined Group Contracting Co., and Rasiyat Holding Company. Markaz’s role as market maker comes from its strong belief in the impact of this tool on financial markets in general, and on shares of listed companies in specific, and is keen to take part in raising further awareness on its importance amongst key market participants.
It is worth noting that Market-Making services mainly aim at finding a continuous balance between supply and demand and bridging the gap between the buying and selling prices, which may contribute to the flow of liquidity in favor of the listed companies, in the market to which these services are provided. This in turn will have a positive impact on the company’s borrowing costs, and support the trading of its stocks at a rate closer to its fair value. In addition, Market-Making services encourage more companies to list their shares on the stock exchange, which ultimately supports the comprehensive development of the Kuwaiti economy.
