New Regulation About The Legal Concept Of Market Maker

Author:Mr Juan Diehl Moreno, Maria Manuela Lava and Agustina Gallo Toppino
Profession:Marval O'Farrell & Mairal

Within the framework of an increasing modernization of capital market regulations, the Argentine Securities Commission issued General Resolution No. 673, which incorporates and regulates the legal concept of the “market maker”.

General Resolution No. 673 dated August 25, 2016 (the “Resolution”) issued by the Argentine Securities Commission (the “CNV”) regulates the legal concept of the “market maker” (the “Market Maker”) by incorporating Section XIX to the secondary trading rules in Chapter V of Title VI of the CNV Rules (T.O. 2013).

The purpose of the Market Maker is to achieve greater liquidity and market competitiveness, generating prices continuously, thus moderating sharp price swings and increasing the volume of records. In this sense, the Resolution establishes that the role of the Market Maker is to provide liquidity to the securities on which Market Makers operate. This makes for a more efficient price formation and the resulting reduction of volatility, by formulating offers for the purchase and sale of securities with minimum differential between their respective prices under the conditions set within each market and according to the specificity of each security to be determined by the applicable regulations.

The Resolution defines the Market Maker as that Clearing and Settlement Agent, duly approved and registered by the CNV and duly authorized by an authorized market to act under that legal concept on the securities set by such market in accordance with the regulations each market issues regarding the authorization, performance and registration. The Resolution also provides the obligation for each market to keep their respective record of Market Makers.

As for the performance of the Market Maker, the Resolution provides that during the respective trading session the Market Maker: (i) must develop activity in the market segment that ensures price-time priority through a software authorized by the CNV; (ii) must act solely on their own behalf; and (iii) may only perform in the securities in which it is enabled by the market.

This is not the first precedent of the Market Maker concept in our country, since it had already been mentioned in Decree 677/2001 of Transparency in Public Offering, that established that the CNV should define the concept of Market Maker and both the...

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