Why Qatar Stock Exchange is racing ahead to expand the investment universe for investors?

Qatar Stock Exchange (QSE), which is racing ahead to expand the investment universe for investors, is expected to see more liquidity providers (LPs), a move that ought to enhance the liquidity in the market and better price discovery.

“Discussions are currently underway to have more LPs,” a senior official of QSE said here on the sidelines of a seminar organised by the bourse in association with QNB Financial Services (QNBFS) and Commercial Bank Investment Services (CBIS).

However, the official did not disclose the names of entities and neither did he tell how many LPs (otherwise known as market makers) would be there in the market.

At present, the Qatar Financial Market Authority has granted licence to LPs — viz the Group and CBIS.

It has become imperative for Qatar to strengthen the LP scheme in view of the expected launch of exchange traded funds (ETFs) and exchange traded products (ETPs).

In May last year, the financial market regulator had approved the liquidity provision scheme that can be carried out by the financial services firms.

The LPs will enable the financial service firms 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.

“Liquidity provision is an important development for us at QSE…Improving liquidity is one of the key components in our overall market development strategy and the LP regime is an important element in helping us to achieve this goal,” QSE CEO Rashid bin Ali al-Mansoori told the meeting. Stressing that the bourse will continue to work with the regulator and other agencies to increase the issuer base and to introduce new products and services, he said the QSE continues to work on improving market access with the aim of increasing the investor base and also continues to seek out ways to improve liquidity across the board for the benefit of all.

Efforts are now on a war footing to launch ETFs and it is learnt that to begin with, foreign debt-based and general index-based ETFs are set for launch, which will be followed by Islamic-index based ETFs.

ETFs are mostly (but not exclusively) index-based open-ended funds that can be bought and sold as quickly and easily as ordinary shares on a stock exchange. They provide investors with the opportunity to access markets that were previously closed to them.

Qatar could expect to see total emerging market ETF buying of $175mn, a Bank of America Merrill Lynch report had said.

The LP activity will assist in reducing the prices volatility, promoting confidence among investors, fostering the listing of new companies and helping to ensure fair and orderly market.

LPs accept the obligation to provide bids and offers in pre-determined securities and in exchange receive a volume related discount on the trading fees. These obligations are reflected in an agreement between LP and the exchange. LPs can enter this activity either at their own initiative or at the request of a listed company. Source: Gulf Times