Saudi Arabia CMA Approves New Regulations Regarding Market Making

The Saudi Arabia Capital Market Authority (CMA) announced on Monday the approval of new regulations and procedures regarding marketing making proposed by the local Saudi Stock Exchange, one of the biggest exchanges in the world, in an effort to fully exploit the potential of the investment sector in the region by increasing liquidity and trading volumes.

The new regulatory framework, Regulations of Market Making and Market Making Procedures, focuses on regulating securities market makers. The law covers activities related to buy or sell orders placed at market openings to ensure the liquidity of the relevant stock market instrument.

The regulator requires market makers to be members of cash or derivatives markets, and these regulated entities must separate their market-making activities from other market activities in accordance with procedures and rules.

The new Regulation stated: "The Market Maker must assign a Depository Centre Account (where applicable) and a CCP account limited to conducting Market Making activities on a specific security or specific securities in accordance with a Market Making agreement."

Besides, CMA puts forward more requirements for market makers, including establishing company accounts with the Securities Depository Center and Securities Clearing Center Company, and all  activities of market makers must comply with the local law on capital markets.

Market makers play an important role in improving market liquidity, and more and more stock exchanges have begun to adjust their market making models. This May, the Vienna Stock Exchange​ announced that it would adopt a new market making model.