Listed Companies Obliged to Designate Market Makers

EghtesadOnline: The Securities and Exchange Organization, the Iranian stock market regulator, has instructed listed companies to designate market makers or else they could be ejected from the market.

News ID: ۷۵۱۵۰۲

17 November 2020

"All listed companies are obliged to designate market makers and if they do not comply they can be delisted or their managers disqualified" Hassan Qalibaf-Asl, managing director of the SEO was quoted as saying by the Securities and Exchange News Agency.

Market makers, or liquidity providers operate as wholesalers buying and selling securities to balance the market—the prices they set reflect market supply and demand.

They help the market function. If investors want to sell a particular security, they are there to buy. Similarly, if they want to buy a stock, they are at hand to have that stock available to sell to investors.

Regulations governing the operation of market makers are now in place and they have been asked to participate actively, Qalibaf-Asl said. "Stock market rules stipulate that listed companies must have at least one market maker," he was quoted as saying.

After historic gains from the beginning of the current fiscal year (March) Tehran’s share market went into a tailspin in mid-August and the trend has continued.

The benchmark of Tehran Stock Exchange, TEDPIX, grew close to 300% before diving deep into the red. Stock market authorities have been struggling to revive the market.

Qalibaf-Asl said market making is used by 298 ticker symbols, which accounts for almost half of the total listed companies at the TSE and the junior market Iran Fara Bourse.

He predicted that the number will increase and expressed the hope that it will help improve liquidity of shares and enhance market efficiency.

Controlling Volatility

"Market makers will improve the liquidity of shares and control volatility in the market. They will help lift both the supply and demand side and aid securities circulate between buyers and sellers".

Market observers blame major shareholders and institutional traders plus those with “inside information” for the current downturn, saying that they had increased offers when share prices reached a peak.

The stock market regulator recently took measures to curb oversupply. Some observers link the oversupply partially to trade in the so-called Justice Shares.  Citing TSE officials, news outlets reported Sunday that selling Justice Shares has been suspended until the market reaches stability.

Justice Shares are shares of government-owned companies that were given free to the six lowest income deciles almost fifteen years ago. Shareholders were not allowed to sell the shares until last May. An estimated 50 million Iranians own such shares.