Qatar Exchange Launches Sponsored Access & Liquidity Provider Activities

24/02/2013

The Qatar Exchange announced the launch of the “Sponsored Access” and the “Liquidity Provider” facilities, whereby the first activity will allow Sponsoring Members to provide eligible customers (Sponsored Participants) direct access to the trading system of Qatar Exchange, while the second activity will enable members to submit LP applications for the QE 20 index-constituent securities in accordance with the governing rules.

In a notice circulated to all market members, the Qatar Exchange stated that direct market access to the trading systems by eligible customers (Sponsored Participants) will be governed by a number of regulatory controls, the most important of which being compliance with Article (44 bis) of QFMA’s Financial Services Rulebook and Article (3.2) of QE’s Rulebook, which provides for the Sponsoring Member’s undertaking of full responsibility for all business executed by the Sponsored Participant under its sponsorship, including trade execution and settlement under the Sponsoring Member’s bank guarantees.

It is worth mentioning that the market notice describes the application process and ongoing obligations, thereby indicating that Sponsored Access will be open for domestic and non-domestic clients. In particular, the domestic client should prove eligibility to perform the said activity and should be licensed as a financial services firm, while for non-domestic clients, the license held in the country of origin should be at least equivalent to a locally-issued license, as determined by QFMA.

As to the LP activity, QE’s market notice highlighted that the door is open to members to submit the LP applications provided that they comply with QFMA’s Liquidity Provider rules as well as the provisions of Chapter 4 of QE’s Rulebook.

In this respect, the Liquidity Provider should have an obligation to provide double-sided (bid/offer) orders in the relevant security (or securities), subject to minimum presence requirements and in accordance with agreed spreads and sizes. Furthermore, Liquidity Providers will get a rebate on trading fee, provided that the obligations are met.

The notice also emphasized that members need to obtain a license from QFMA as a condition to start their activity as a Liquidity Provider. Therefore, the licensing process requires the candidate to be provisionally nominated by the Qatar Exchange and the LP application needs to be submitted to the Exchange, along with the supporting documentation, the most important of which are the business plan, a functional description of systems that are used to support the LP activity, an updated organizational chart of the company, the internal controls used in the practice of the LP activity and how risk management relative thereto is organized so as to cover segregation of the LP (own account) business and client business.