In a statement, the stock exchange regulator said the expanded framework would result in market makers having greater flexibility to quote prices and respond to market demands. KUALA LUMPUR: Bursa Malaysia Bhd has expanded its market-making framework in an effort to increase market efficiency and promote liquidity and depth. In a statement, the stock exchange regulator said the expanded framework would result in market makers having greater flexibility to quote prices and respond to market demands. “Market-makers are an integral part of the ecosystem, improving market efficiency and providing greater liquidity, especially for less traded and less liquid stocks. “As such, we believe this expansion will further enhance the attractiveness and competitiveness of the capital market, thereby enticing more investors and market participants, ” it added. With the new changes in the expanded market making framework, Bursa Malaysia said it aimed to improve market-makers’ ability to manage risk by hedging their exposure to price volatility in the underlying securities. The changes include “qualifying criteria for foreign entities to participate as a market-maker has been expanded to allow for foreign entities that meet the prescribed criteria in the rules of Bursa Malaysia Securities Bhd to register as a market-maker.” Besides that, Bursa Malaysia has introduced a new category of market makers called the derivatives specialists who would be allowed to utilise the permitted short selling (PSS) framework for market making. “A derivatives specialist will be permitted to carry out PSS on the underlying securities of the single stocks futures contract or stock option contract which are approved securities, as part of the market-making activities of the derivatives specialist in the derivatives market.“An entity that has been appointed by Bursa Malaysia Derivatives Bhd (BMD) as a market maker in respect of single stock futures contract or stock options contract may apply to Bursa Securities to be registered as a derivatives specialist, ” said Bursa Malaysia. However, it added there are currently no single stock option contracts listed on BMD. Moreover, Bursa Malaysia said the existing market makers of structured warrants (SW), single stock options and single stock futures would also be allowed to undertake PSS. It noted that the expansion of the PSS framework would allow market makers to execute PSS of the SW, single stock options and single stock futures. “For market makers of SW, PSS will facilitate the issuance of single stock put warrants which often require market makers to short sell the underlying shares to hedge their put warrant position, ” Bursa Malaysia said.
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