QNB Financial Services (QNBFS), a financial brokerage subsidiary of QNB, will start liquidity provision activity for Qatar Islamic bank (QIB) from Thursday (July 23).
This has been made possible after QNBFS entered into a liquidity provision agreement with QIB, a Qatar Stock Exchange communique said.
Liquidity provision is an important development and one of the key components in the overall market development strategy of the QSE and liquidity providers would enable them to submit constant quotes for the sale or purchase of a particular security to increase its liquidity as per the controls and conditions set forth in the LP agreement.
A liquidity provider is an underwriter or a market maker that is a sizeable holder of a given security or that facilitates the trading of the security, providing greater price stability and distribution of the securities to both retail and institutional investors.
Liquidity providers guarantee transactions at the best price and boost the volume of transactions in the order book. Without their assistance, the number of transactions in the security could decrease and the ability of buy- and sell-side firms to accumulate or dispose of stock would be diminished. In February this year, the QFMA had approved QNBFS to offer liquidity provision scheme in order to ensure greater price stability and improved liquidity in the country’s financial market.
QNBFS invested in one of the most recognised international trading systems for liquidity provisioning activity. Moreover, it brought in experienced traders with advanced educational and professional experience in market making and liquidity provisioning.
Highlighting that the liquidity provider has to necessarily provide constant bids and offers in the trading system; a source said this would help ease the volatility and instill confidence in the market as well as encourage new listings.
Mannai Corporation had earlier entered into a pact with The Group Securities to provide liquidity provision services, in accordance with the Qatar Financial Market Authority-approved liquidity provision scheme. The objective of this agreement is to support increased trading volumes and a more active market in Mannai Corporation shares.
