UMVA has learned that a major development is underway in the securities market, as regulators unveil a proposed framework for listed securities that promises to revolutionize the way market makers operate.
The new draft rules, released recently, outline a comprehensive set of guidelines for market makers, including eligibility requirements, disclosure provisions, and reporting obligations. At the heart of the proposal is a plan to allow exchanges to offer incentives to market makers, such as reduced transaction fees and liquidity rebates, in a bid to boost trading activity and align local market practices with international standards.
Market makers, firms that provide liquidity and facilitate trading by continuously posting buy and sell quotations for securities, would be required to meet strict criteria to participate in the new framework. Only exchange trading participants licensed by the regulator would be eligible, and they must have a minimum of P100 million in unimpaired paid-up capital, a track record of trading experience, and a valid market-making agreement with an authorized party.
Under the proposed rules, market makers would be obligated to maintain continuous buy and sell quotations during trading hours, based on parameters set by the exchange, and maintain sufficient inventory to support liquidity in the securities they cover. The quotations would need to be firm and executable, except in exceptional circumstances such as system failures or market-wide disruptions.
According to information obtained by UMVA, the draft rules also outline stringent reporting and compliance requirements for market makers, including the submission of trading and quotation reports, compliance certifications, and notifications of material breaches to the exchange. Exchanges, meanwhile, would be required to regularly submit market-maker performance reports to the regulator.
The proposal is part of a broader effort to revitalize capital market activity and enhance market integrity. If adopted, the new rules would require exchanges to adopt implementing rules and guidelines governing market-making activities, subject to regulatory approval. The public has until July 7 to comment on the draft rules, which could have far-reaching implications for the securities market.
