Market Maker Overview

Market Makers provide liquidity to their clients by allowing them to buy and sell when they want to trade. In effect, market makers match buyers and sellers who want to trade the same instrument at different times and are thus unable to trade directly with each other. 

In the Kuwaiti capital market, Market Makers are investors who ensure the availability of supply and demand for one or more security, according to such controls as may be issued or approved by the Capital Markets Authority (CMA).

Market Maker Registration

The Market Maker must register at Boursa Kuwait to conduct market-making activities on a listed security or more for a renewable year. A Market Maker may not request a waiver from carrying on market making activities on a security within the first three months of commencing market making activity on that security, and his application for registration shall be submitted in accordance with the provisions of Article (4-6) of the Boursa Kuwait Rulebook.

Market Maker registration is subject to licensing by the CMA as per the provisions of the Fifth Module of the CMA Executive Bylaws (Securities Activities and Registered Persons). In case of License cancellation or suspension, the registration will automatically be nulled or voided accordingly. 

Boursa Kuwait may register the Market Maker to practice its activity on one or more Securities. However, Market Makers may not be registered for rights issue. Furthermore, Boursa Kuwait may register more than one Market Maker to conduct market making activities on a security. 

The Market Maker is required to sign the Market Maker Agreement, before the start of his activity, as it will specify their rights, duties and obligations. 

The Market Maker can conclude agreements with brokers or any other party in order to conduct their activity on the exchange. The Market Maker shall provide Boursa Kuwait with a copy of these agreements once they are signed and verified.

The Market Maker shall disclose to Boursa Kuwait its registration to practice its activities on the Securities, and this disclosure must be submitted as per the form. 

Boursa Kuwait will announce the Market Maker registration status as per the previous article after the signing of the Market Maker Agreement by all parties, and market-marking activities will be effective starting from the trading session following the announcement. 

Market Maker Deregistration

Without prejudice to the period of three months stipulated in the Rulebook, the Market Maker may request to deregister, and has the right to specify the effective date of deregistration as long as it is not less than thirty days from the submission date. However, the Market Maker may not request to reregister on the same Security for one year from the effective date of deregistration. 

Boursa Kuwait will issue its resolution on the deregistration request by the Market Maker, if its resolution must include the effective date of deregistration. In addition, Boursa Kuwait will notify the CMA and market participants, and post an announcement on its website. 

The Market Maker must continue with its obligations during the deregistration period on the registered Security until the effective date. 

Market Maker Obligations 

The securities are allocated into different categories based on their liquidity as shown in the Market Maker Agreement. The Market Maker obligations are determined according to the category of the security, and Boursa Kuwait has the right to amend the Market Maker’s obligations as per the liquidity category shown in the agreement and must notify the CMA and the Market Maker immediately.

The Market Maker must comply with the minimum required percentages of total monthly traded value for trades pursuant to the Market Maker Agreement. The Market Maker must also comply with order entry on the respective security while adhering to the following:

• The minimum presence requirement, as shown in the Market Maker Agreement
• Maximum spreads between bids and asks, as shown in the Market Maker Agreement
• The minimum quote size or value, as shown in the Market Maker Agreement

The Market Maker must also maintain the minimum cash balance at all times as shown in the Market Maker Agreement.

The Market Maker must notify Boursa Kuwait immediately if he fails to fulfill any of his obligations, regardless of the reasons, as well as notifying the exchange if and when the breach of obligations is rectified. 

Boursa Kuwait may exempt the Market Maker from any of its obligations specified in the Market Maker Agreement if they cannot perform such obligations due to causes beyond their control. Boursa Kuwait may, after obtaining CMA approval, exempt the Market Maker from any of its obligations for the public’s best interest.

Market Maker Obligations' Exemption

Boursa Kuwait may exempt the Market Maker from his obligations on a certain security in the following ordinary situations:

• During the opening and closing auction sessions in Boursa Kuwait
• During intra-day auctions on a specific security triggered by it exceeding its price limits during the trading session
• If a security has bid orders entered at the upper price limit and no sell orders entered, or if a security has ask orders entered at the lower price limit without any bid orders entered
• Any other cases determined by Boursa Kuwait, in case the Market Maker cannot perform his obligations due to reasons beyond his control 

Boursa Kuwait may, after obtaining CMA approval, exempt the Market Maker from any of its obligations for the public’s best interest.

The Market Maker is exempted from the Market Maker obligations on a certain security in the following extra-ordinary situations:

• If the Authority decides to change the price spread between bid and ask in extremely volatile market conditions
• When the Security is suspended from trading. 

In all previous cases, the Market Maker should resume his commitment to his obligations at the end of the period in which the exemption occurred. The exemption period will be deducted from the period that the Market Maker is obligated to practice its activity according to the Rulebook and the Market Maker Agreement. 

Regulatory Requirements

The Market Maker should maintain adequate internal control systems enabling the practice of its activities as a Market Maker as per the Rulebook and the Market Maker Agreement. The Market Maker should notify Boursa Kuwait immediately in the case of a change in the internal control systems that could affect it from fulfilling its obligations. Furthermore, Boursa Kuwait has the right to review the internal control systems of the Market Maker and has the right to add additional requirements to the systems.

 Market Maker Suspension

The Market Maker will be suspended from practicing his activities if his license is suspended or canceled by the CMA.

 Boursa Kuwait may issue a decision to suspend Market Maker’s activities if the Market Maker breaches his obligations repeatedly, after approval from the CMA. Boursa Kuwait may also issue a decision to suspend or restrict activities on a registered security in the following cases: 

• Not meeting one or more of the registration requirements
• Failing to fulfill the obligations stipulated in the Rulebook or the Market Maker Agreement
• If the Market Maker fails to fulfill the obligations related to the settlement of the transactions conducted in Boursa Kuwait

Boursa Kuwait will announce its decision of suspension on its website once it is issued by Boursa Kuwait or the CMA.

General Controls

The Market Maker shall provide Boursa Kuwait with all the required reports, data, information, and documents, and Boursa Kuwait may request audited reports from the Market Maker. The exchange also has the right to publish the Market Maker’s performance on its website.

The Market Maker may not short sell a registered security unless it is covered, prior to the operation, by borrowing the security through the clearing agency.

The Market Maker Agreement and agreements made between the Market Maker and any broker may include provisions that warrant receiving a rebate on commissions for transactions performed given the fulfillment of their market making obligations.

After CMA approval, Boursa Kuwait has the right to amend the rules provided that it notifies the Market Maker once the amendments are approved.