(LP)
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1. What is Liquidity Providing?
Liquidity Providing is a program created to promote a stock liquidity by requiring the member registered as Liquidity Provider (LP) to enter bid/ask orders to permanently reduce the bid/ask spread to 10 tick sizes or lower during the continuous session.
Therefore, the ultimate goal is to ensure that the order book always has bid and ask orders stood by, so that investors always can find buyers and sellers in the market. In addition, the bid-ask spread is reduced to a low level so that investors would find it less costly to trade.
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2. Qualification of a LP
CSX’s member who wishes to become a LP shall fulfill the following requirements:
- ✓ Hold underwriting license or dealing license; ✓ Have at least one market representative to carry out the liquidity providing activities; ✓ Have a supervisory and internal control mechanism.
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3. Obligations of a LP
The LP is required to place bid and/or ask orders so as to reduce the spread to 10 tick- sizes or lower within 5 minutes from the occurrence of the “excessive” spread.
Example: When the spread exceeds 10 tick sizes (from 5,800 to 6,200 for instance), LP must decide to produce an allowed spread which lies between 5,800 and 6,200. In below example, the spread is 5 tick sizes, from 6,000 to 6,100.
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4. Current Liquidity Providers
| No. | Name | Covered Stock |
|---|---|---|
| 1 | Yuanta Securities (Cambodia) Plc. | PPAP |
| 2 | SBI Royal Securities Plc. | PAS |
| DBD |
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5. Incentives
For its liquidity providing transactions, the LP is entitled to an exemption of the CSX’s fees - trading, clearing & settlement and book-entry fees.
Top Liquidity Provider
| Name | Covered Stock |
|---|
- Liquidity Provider’s performance is assessed monthly based on three below criteria:
- ✓ Timely Order Placement – Within the 5 minutes from the occurrence of the spread greater than 10 tick-sizes. ✓ Spread Improvement – Lower than 10 tick-sizes ✓ Trade Contribution – LP trading value as compared to the total trading value of the covered stock.
