Oslo Bors is to copy the successful example of the Stockholm stock exchange and introduce a market making system to boost liquidity in shares and primary capital certificates that have so far attracted only limited interest.
From 1 January 2005, the Oslo Bors liquidity provision scheme will limit spreads to no more than 4% of the offer price; volume quoted in the trading system order book for both bid and offer prices will be in at least four round lots; binding orders will be quoted for at least 85% of the time for which continuous trading takes place during every trading day, except where Oslo Bors approves a temporary exemption for specific reasons.
In order to participate in the liquidity provider scheme, a company must sign an agreement with an investment firm approved by Oslo Bors as a supplier of services. All liquidity provider agreements must be disclosed through the Oslo Bors company announcement system. In addition, Oslo Bors will publish details on its web site and elsewhere of the member firms approved as suppliers of liquidity provider services. The stock exchange lists and tables published by Oslo Bors will also identify which shares have a liquidity provider.
In October 2004, Oslo Bors introduced new categories for listed shares and primary capital certificates based on liquidity. The launch of the liquidity provider scheme will have an effect on allocations to the liquidity categories.
“The quality of the order book, as demonstrated by a low bid-offer spread and certain order volumes, is of benefit to investors and is also a good indicator of a market’s liquidity,” explains a spokesman for SEB in Oslo.
Oslo Bors therefore intends to change the criteria for the OB Match category so that shares which do not meet the threshold of at least 10 trades per day but which show a spread performance over the target monitoring period that satisfies the minimum requirements for a liquidity provider arrangement will be included in the OB Match category. Shares where the issuer has entered into liquidity provider agreement with a member firm in accordance with the arrangements set out above will be automatically included in the OB Match category with immediate effect. Oslo Bors plans to implement these changes to the liquidity categories in mid-March 2005, says the SEB spokesman..