Bahrain Bourse Implements New Regulatory Framework to Boost Market Liquidity
In a bid to elevate its financial standing, the Bahrain Bourse has rolled out a fresh regulatory framework for market making and revamped rules for liquidity providers. This move, greenlit by the Central Bank of Bahrain, is set to fortify the exchange’s capital reserves and bring it in line with global standards, ultimately benefiting investors and market players alike.
Transition Period for Compliance
Effective July 28, existing market makers will be rebranded as liquidity providers, with a transitional period in place to ensure adherence to the updated guidelines. This strategic decision forms part of the Bahrain Exchange’s wider agenda to revamp and invigorate the country’s financial markets, attracting foreign investors, boosting market participation, and fostering a robust trading environment.
Pivotal Role in Economic Development
Foreseen as a game-changer in Bahrain’s economic landscape, these regulatory changes are poised to reinforce the nation’s stature as a pivotal financial hub in the region. Abdulla Janahi, the senior director of trading operations at the exchange, emphasized the significance of these new rules in enhancing market activity, streamlining price disclosure processes, and optimizing market efficiency through improved order execution.
Membership Types Introduced
The revamped framework introduces two distinct membership categories aimed at ramping up market activity: liquidity providers and market makers. While liquidity providers will facilitate trading by placing continuous buy and sell orders for specific stocks on behalf of issuing companies, market makers will oversee funds for designated stocks, ensuring smooth trade flow as per agreements with the exchange.
Dual-Layered Approval Process
Both types of participants must meet stringent licensing requirements mandated by the Central Bank of Bahrain and secure accreditation from the Bahrain Exchange. This dual-layered approval process is designed to uphold market integrity and stability by ensuring that only qualified entities can partake in market activities, as reported by the Bahrain News Agency.
Future Outlook
With a consultation paper released in September 2023 to gather feedback from market players, this regulatory overhaul is anticipated to significantly boost market activity, attract a broader investor base, and enhance overall efficiency and transparency in the Bahraini capital market.