A Market Making Security (MMS) refers to an automatch stock designated by the Exchange to be traded with securities market making facilities.  A MMS can also be admitted as a Designated Security for short selling and for tick rule exemption. 

Currently, MMS consists of Exchange Traded Funds (ETFs) and securities traded under the Pilot Programme and their trading arrangements are as follows:

¹ The seven Nasdaq stocks traded under the Pilot Programme are not exempted from tick rule
²  Rule 503 in the Rules of the Exchange is not applicable to all the securities traded under the Pilot Programme since their Previous Closing Prices are not being displayed

Role of Securities Market Maker

The main role of  a Securities Market Maker (SMM), is to offer bid and ask prices and provide enhanced liquidity for ETF units to allow investors to transact at almost any time during the trading hours.  Their services are helpful when trading of a less liquid ETF becomes limited due to the absence of active buyers and sellers.  Actively traded ETFs can also benefit from the additional liquidity provided by SMMs when there are many orders at the bid and ask queues.  

Stock Exchange Participants can apply for SMM permits from the Exchange.  Before being granted an SMM permit, the Exchange Participant must demonstrate that it is suitably qualified in terms of financial standing, trading record, personnel, computer equipment, internal security procedures and risk management.  The SMM permit is renewable every year subject to satisfactory performance.

Application for Securities Market Maker permits and facilities

The form required for the application of SMM permits (Form 10) can be downloaded here.  SMMs can also apply for Market Making Open Gateway or Market Making AMS Terminal provided by the Stock Exchange upon payment of a fee.

Market Making by Corporate Clients

An EP may apply to make market on its own and act as an SMM or for its corporate client as a Designated Specialist.  The client must fulfill certain requirements before it can become a Designated Specialist.  The relevant regulations are available in the Fourteenth Schedule of the Rules of the Exchange (click here for details).

Obligations for Securities Market Makers

Prior to the listing of an ETF, a set of obligations will be set for each ETF and abide by all SMMs making market for the same ETF.  Click here to view the permissible range for obligations and actual obligations for each ETF.