A new market-making mechanism is to start on June 30 to improve the market liquidity of 140 stocks listed on the Taiwan Stock Exchange (TWSE) and the Taipei Exchange, the Financial Supervisory Commission said yesterday.
The TWSE has selected 60 stocks and the Taipei Exchange has chosen 80 to be included in the mechanism, Securities and Futures Bureau Deputy Director-General Tsai Li-ling (蔡麗玲) told a videoconference, without identifying the stocks.
The chosen stocks had lower-than-average turnover last year, but are worth investing in, with earnings per share of more than NT$2 and dividends distributed, Tsai said.
Eight brokerages would serve as market makers to help boost the trading volume of the stocks, she added.
The market makers would have an obligation to give buy and sell quotations, and they could not place immediate-or-cancel or fill-or-kill orders, while their quotations should remain valid for at least half of the trading session, the exchanges said.
The market makers’ sell quotation could not be higher than their buy quotation for the same stocks by more than 3 percent, and once their quotations are accepted, they must conduct the transaction immediately, the exchanges’ rules showed.
For example, if a brokerage’s buy quotation for a stock is set at NT$100, its sell quotation could not surpass NT$103, TWSE trading division director Ben Chen (陳正斌) told the Taipei Times by telephone.
“We set the 3 percent limit as the market makers’ main mission is to boost the stocks’ trading volume, and it would not be realistic to expect investors to accept overly high selling prices for such stocks,” Chen said.
The 3 percent range should provide enough flexibility for brokerages to adjust their price setting and profit, Chen said.
The trading volume of any stock could not be less than 5,000 shares in a single transaction, and the valuation of each transaction could not be lower than NT$200,000, Chen said.
Market makers would not be required to give buy or sell quotations every day, but the number of the days they give quotations should be at least as high as 80 percent of the total days of that month, the rules showed.
The market-making mechanism is expected to direct retail investors’ attention to stocks that could be good choices, but are unpopular, Chen said.
“Investors are concerned about the liquidity problem of stocks. Even if a stock is a good target, investors would not consider it if the turnover is too low for fear of not being able to sell it in the future,” he said.
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