A liquidity provider is an exchange member responsible for ensuring liquidity in a specific security by obligatorily placing limited buy and sell orders on the market within a specific price range (bid-ask spread) and executing trades based on these orders in their own name and for their own account.
The process of obtaining the status of a liquidity provider is extremely simple and brief.
The process of obtaining the status of a liquidity provider is extremely simple and brief.
- Conditions for Obtaining the Status of a Liquidity Provider
- Any exchange member who commits to maintaining at least the minimum requirements prescribed by the Instructions for Liquidity Providers can acquire the status of a liquidity provider.
For performing the role of a liquidity provider, an exchange member can either enter into a special agreement with the issuer or decide to do this service independently without any prior agreement with the issuer.
- Application for Obtaining the Status of a Liquidity Provider
- To obtain a liquidity provider status, it is necessary to submit a completed application for liquidity provider status using a special form to the exchange (Form 01/VL).
- Assignment of the Liquidity Provider Status
- The assignment of the liquidity provider status is typically completed within a few days after receiving the application. Based on this, an agreement is signed with the exchange member, and a resolution on the assignment of the liquidity provider status is issued. Subsequently, the liquidity provider status is enabled in the trading system for the exchange member.
- Benefits
- Becoming a liquidity provider does not entail any additional costs for the exchange member.
Due to positive effects of providing this service on trading, liquidity providers are granted discounts on fees for trades executed on behalf of maintaining liquidity.
Usually, the issuer of the financial instrument also financially supports the liquidity provider of their instrument.
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