ISLAMABAD: Security and Exchange Commission of Pakistan (SECP) has approved regulations governing market-making for Pakistan Mercantile Exchange Limited (PMEX) to promote liquidity and efficiency in the commodity futures market.
A statement issued by SECP here on Tuesday said that market- makers play an important role in the capital market by promoting liquidity though buying and selling commodity future contracts in return for a bid and ask spread.
Several contracts having good potential for hedging have not been trading actively due to lack of liquidity in the market and it has grown, it added.
It was therefore considered essential to encourage market makers to provide liquidity in such contracts under a regulated environment benefiting hedgers and investors.
The regulations broadly cover qualification criteria for a market-maker, roles and obligations of market makers, market-making agreement including a key document agreed and signed between the market-maker and the exchange, powers, functions and obligations of PMEX and disciplinary actions that may be taken by it.
These regulations will promote investors' confidence in the commodity futures market through enhanced profitability, reduced volatility in prices and efficient execution of orders.
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