BoV becomes a market maker
expected to add depth and liquidity to the market
As of Monday, Bank of Valletta began buying and selling Malta Government
Securities and selected corporate bonds listed on the Malta Stock Exchange
at published prices. In this sphere, BoV has set itself up as a market-maker
and will eventually extend the service to cover selected listed equities.
As such, the BoV every morning will publish the opening bid and offer
prices at which it will be ready to trade benchmark issues of Malta
Government Securities and selected corporate bonds.
The spread between the opening bid and offer prices will normally be
of 0.75 per cent in the case of Malta Government Securities and of one
per cent for other corporate bonds.
Over the course of the trading day, BoV will be ready to take up any
supply on the market of all current issues of Malta Government Securities
as well as the selected corporate bonds, and similarly to meet any demand
that might arise provided the Bank has in its inventory the stocks in
demand. The bid and offer prices will be adjusted constantly throughout
the day to reflect changes in the demand and supply of the individual
All trades will be executed by BOV Stockbrokers Ltd. (BoVSL), and BOV
as a market maker will be committed to buy or sell securities at the
quoted prices up to a limit. The limit, otherwise known as the normal
market size, will be based on the liquidity in the market, and the daily,
weekly and annual turnover in the individual securities.
The initial normal market size will be Lm100,000 per trade in the case
of Malta Government Securities and Lm 10,000 in the case of the selected
corporate bonds. Any trade larger than the Normal Market Size may not
be met at the quoted price; however, the Bank will undertake always
to quote a lower or higher price as may need to be negotiated. Whilst
there are no hard and fast rules, the Normal Market Size in a particular
security will generally not exceed the average daily turnover over the
BoV has been toying with the idea for some time and after the success
of BoVSL, the Bank had decided that the time was right for the service
to be launched on to the market. The banks new role as a market
maker is expected.
BoV Chairman, Joseph F.X. Zahra said that he was pleased that the Bank
of Valletta had once more shown its total commitment to the development
of the local capital market. He added that he was convinced that the
BOV initiative would be followed in due course by other institutions,
a development which would be welcomed as the depth and strength of the
market would be enhanced by a larger number of participants.