BoV becomes a market maker

- initiative 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 securities.
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 preceding quarter.
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 bank’s 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.