Market making

The Market Making regime at Oslo Børs aims to improve the quality of our orderbooks for different instruments. Information on Market Making Agreements that satisfy the members’ MiFID II obligations when using algorithms to post two-way prices in one or more instruments, are also available here.

Market Making Policies

Oslo Børs will have the following policies in place to comply with MiFID II regulations:

  • Investment firms engaged in algorithmic trading and pursuing Market Making strategies on any Oslo Børs traded equity, derivative and equity-like instrument will be required to enter into a Market Making Agreement with Oslo Børs. 
  • Oslo Børs will offer Market Making Schemes on the following liquid instruments:
    • Equities
    • ETFs
    • Equity options and futures/forwards
    • Equity index options and futures
  • Although not a MiFID II requirement, Oslo Børs will maintain its current Liquidity Provider Programme in less-liquid equity instruments to accommodate continuous trading and better order books in these instruments
  • Oslo Børs will introduce ‘Stressed Market Conditions’, during which amended Market Making obligations may apply, and ‘Exceptional Circumstances’, during which no Market Making obligations will apply

Market Making Agreement

  • It is the member’s responsibility to notify Oslo Børs of its need to enter into a Market Making Agreement with the Exchange and for which instruments it applies
    • Prior to entering into a Market Making Agreement, Oslo Børs will not surveillance its members’ Market Making behaviour
    • Once a Market Making Agreement has been signed, Oslo Børs will conduct Market Maker surveillance on the instruments covered by the agreement on a monthly basis to ensure compliance with the agreement
    • Orders entered in the member’s capacity as Market Maker must be marked with order attribute type «Liquidity Provision», and must be marked with order capacity «Principal» or «Matched Principal»
  • Market Maker Agreements have a duration of one month
    • Automatic renewal of the Market Maker Agreement at the end of each month for the instruments that have met the minimum requirements during the past month
    • If no instruments met the requirements during the past month, the Market Maker Agreement is terminated
    • Early termination of a Market Maker Agreement by a member or by the Exchange takes effect immediately - the member is free of its Market Maker obligations immediately after acknowledgement of receipt of termination notice
  • Oslo Børs will post a list of members who have signed a Market Maker Agreement on our website, and which instruments are covered by each member’s Agreement. This list will be maintained monthly

Exceptional circumstances

The member firms obligation to provide liquidity on a regular and predictable basis, in accordance with the Market Making agreement(s), shall not apply in any of the following exceptional circumstances (adopting the terms of MiFID II RTS 8 article 3, subsequently re-issued by the Commission under reference C(2016) 3523 final):

  1. a situation of extreme volatility triggering volatility mechanisms for the majority of financial instruments or underlyings of financial instruments traded on a trading segment within the trading venue in relation to which the obligation to sign a market making agreement applies;
  2. war, industrial action, civil unrest or cyber sabotage
  3. disorderly trading conditions where the maintenance of fair, orderly and transparent execution of trades is compromised, and evidence of any of the following is provided:
    1. the performance of the trading venue’s system being significantly affected by delays and interruptions;
    2. multiple erroneous orders or transactions;
    3. the capacity of a trading venue to provide services becoming insufficient;
  4. where the investment firm’s ability to maintain prudent risk management practices is prevented by any of the following:
    1. technological issues, including problems with a data feed or other system that is essential to carry out a market making strategy;
    2. risk management issues in relation to regulatory capital, margining and access to clearing;
    3. the inability to hedge a position due to a short selling ban;
  5. for non-equity instruments, during the suspension period referred to in Article 9(4) of Regulation (EU) No 600/2014 of the European Parliament and of the Council.

Oslo Børs will as soon as technically possible make public, through a stock exchange notice, the occurrence of the exceptional circumstances referred to in points (a), (b), (c) and (e) and the background for the situation considered to have occurred. The Market Making obligations cease in the period when the exceptional circumstances persist, but repeal of the obligations will not extend beyond market close unless deemed necessary by the Exchange.

The resumption of normal trading, after the exceptional circumstances have ceased, will be made public through a stock exchange notice as soon as technically possible. The contractual obligations under the Market Making Schemes will resume 30 minutes after such notice is disclosed unless otherwise specified by the Exchange.

In the event a member firm cannot fulfil the obligation to provide liquidity on a regular and predictable basis in accordance with the Market Making Scheme(s) due to its ability to maintain prudent risk management practices is prevented by any of the instances mentioned in (d) (i)-(iii) above, the member firm shall immediately inform Market Surveillance at Oslo Børs.

Stressed market conditions

Stressed market conditions are considered to arise, in relation to a financial instrument, in the following situations:

  1. When a circuit breaker (automatic volatility interrupter) is triggered during continuous trading: The period from the circuit is triggered and until 10 minutes after the re-opening auction call is ended.
  2. When three circuit breakers are triggered in the same instrument during a trading day: The rest of the trading day.
  3. Other events where the Exchange anticipate there will be significant short-term changes in price or volume. In such cases, members firms who participate in a Market Making Scheme will be notified.

Market making matrix

 

 

 

Market Making Agreement (All instruments)

Market Making Scheme  (Liquid instruments)

Liquidity Provision Program (non-liquid instruments)

 

Contract

Mandatory for investment firms under MiFID II

Mandatory for trading venues under MiFID II

Voluntary agreement between issuer and investment firm

 

Asset class

Equities and equity-like
 ETFs
 Derivatives

Equities and equity-like
 ETFs
 Derivatives

Equities and equity-like

 

Activity identification

Order flagged with: "Liquidity Provision" and "Algorithm"
 Order capacity: "Principal" or "Matched Principal"

Order capacity: "Principal"

 

Detection

On member's request only

N/A

N/A

 

Surveillance

Monthly control of presence within size and spread for members who have signed agreements.

Montly control of presence within size and spread for members under a Market Making Scheme.
 Intermittantly on request

On request of issuer and/or Market Maker

 

Participants

Required for members meeting requirements

Optional for members, subject to Oslo Børs approval

Available for members approved by Oslo Børs as Liquidity Provider

Normal Market Conditions

Presence

50 %

50 %*

N/A
Agreement between issuer and Market Maker

Quantity

Comparable size

Equities:
 Comparable size*
 ETFs:
 Alt. 1: NOK 250.000-500.000
 Alt. 2: NOK 500.000-1.000.000
 Derivatives:
 10-100 contracts**

Spread

Liquid instruments: 1%
 Illiquid instruments: 2%

Equities:
1%
ETFs:
Alt. 1: 0.50%
Alt. 2: 0.75%
Derivatives:
 "Normal spreads"-table**

Benefits

N/A

Equities:
None
ETFs:
Discount on MM-trades
Derivatives:
Discount on MM-trades

Stressed Market Conditions

Presence

N/A

50 %*

N/A
 Agreement between issuer and Market Maker

Quantity

 Equities:
 Comparable size*
 ETFs:
 Alt. 1: NOK 250.000-500.000
 Alt. 2: NOK 500.000-1.000.000
 Derivatives:
 10-100 contracts**

Spread

 Equities:
 2%
 ETFs:
 Alt. 1: 0.50%
 Alt. 2: 0.75%
 Derivatives:
 "Stressed market spreads"-table**

Benefits

 Equities:
 Performance-related benefits*
 ETFs:
 Discount on MM-trades
 Derivatives:
 Discount on MM-trades

Exceptional Market Conditions

No quoting obligation / suspension of performance monitoring

N/A

* Oslo Børs may add more stringent obligations to Market Makers in order to be eligible for specific incentives

** Specified in derivatives Market Making Scheme

Kontakt oss

Torbjørn Vik

  • Produktansvarlig aksjer
  • tv@oslobors.no
  • +47 22 34 17 47
  • +47 99 69 18 91