BUSINESS REPORTER
MUSCAT, JULY 8
The Market Makers initiative, introduced by the Muscat Stock Exchange (MSX), aims to revitalize trading and establish stability in the stock exchange. This initiative is part of a set of six initiatives announced by the exchange, which includes services related to market makers and liquidity providers.
The primary objective of the Market Makers initiative is to facilitate liquidity provision for securities and maintain a balance between supply and demand. It also aims to curb the presence of unfulfilled buy or sell orders in the market. By implementing this initiative, the Muscat Stock Exchange intends to create an environment that ensures continuous trading activity and enhances the efficiency of pricing processes for listed companies.
Mustafa bin Ahmed Salman (pictured), Chairman of the Board of Directors of the United Securities Company, which is one of the licensed market makers, expressed his belief that these initiatives would contribute to revitalizing trading and fostering stability within the stock exchange. He emphasized that these initiatives align with the strategies of several brokerage firms operating in the Muscat Stock Exchange.
In a statement to Oman News Agency, he said United Securities is eager to actively participate in expanding activities and services that contribute to the overall revitalization of the stock exchange, he said.
The role of a market maker is crucial in this initiative, Salman stated. Market makers have the ability to place various orders at different levels consistently. This activity aids in creating depth in the stock exchange and generating interest in the listed companies. The presence of market makers provides assurance to investors that there are continuous buy and sell requests for the securities, thus facilitating liquidity and enabling investors to enter or exit the market at the appropriate time. As a result, trading in the shares becomes more efficient, and the pricing process for these companies improves.
To initiate the market maker activity, companies need to establish a specialized team trained to monitor the listed companies and develop trading mechanisms. It is also necessary to employ electronic systems that can rapidly and automatically place multiple orders at different levels, based on equations determined by the team after observing news and information that may impact the direction of the company.
Furthermore, continuous studies are required to assess technical analysis levels such as stability, support, and resistance. This information is utilized to determine the appropriate times and levels at which orders should be placed, considering margin ratios. Companies typically develop a procedural guide that governs the trading process, ensuring adherence to specific goals and ethical standards.
The allocation of a RO 100 million fund to support the stock exchange is a positive step that instills investor confidence in the availability of liquidity, the official said. When investors participate in public markets, they expect to have the ability to sell and exit their investments when the time is right. Liquidity plays a crucial role in attracting investors to the stock market, and the establishment of this fund provides reassurance to both local and foreign investors. This development also improves the evaluation and pricing of companies, gradually eliminating any discounts applied to their valuation due to low trading volume.
The revitalization of the stock exchange is expected to have a positive impact on new listings, encouraging more companies to convert into public shareholding entities and list their shares on the stock exchange, he added.
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