Affirming the role of market maker

(Baonghean) - Along with the development of the macro economy, the development of the bond market in general and the government bond market in particular plays an increasingly important role in attracting medium and long-term capital to meet urgent spending needs of the state budget and stabilize the national financial system.

Developing the government bond market in depth according to international trends and practices is an urgent requirement, in which the solution of developing a market maker system is one of the important solutions.

Market makers play the role of distributing capital between issuers and investors in the primary market by participating in bidding sessions for issuing government bonds, supporting and creating a stable demand for government bonds in the primary market. They are also the underwriters for issuing government bonds when they grasp the bond investment needs of investors and the ability of the issuer to issue government bonds; They are also the ones who provide regular buying and selling prices for standard bond codes in the secondary market to create standard prices in the market, encouraging liquidity in the secondary market.

Commercial banks with large financial potential in the market are the most suitable organizations to become market makers (Illustration photo)

In order for the market maker system to operate effectively in the bond market, countries typically specify the obligations and rights of members.

In terms of rights, market makers are guaranteed by state management agencies to be balanced with the obligations they have performed. According to international experience, market makers have the exclusive right to participate in bidding, the right to place bids close to the closing time of the bidding session, the exclusive right to use the trading system to update the market situation and execute transactions, the right to participate in a wider system of operations than other trading members and access to liquidity support mechanisms when there are liquidity difficulties in performing the obligation to make two-way firm bids.

Thus, the market maker system plays an important role in the government bond market and the development of the market maker system is the core requirement for the sustainable and stable development of the government bond market. To establish this system, the Government needs to establish the best supporting environment for market makers to operate effectively and the basic conditions for the establishment of the market maker system.

Regarding the structure of market makers, the market maker system in countries includes commercial banks, investment funds, securities companies, etc. The fact that market makers are mainly commercial banks is completely consistent with the development trend of the government bond market, which is a place to mobilize capital for the state budget and often has a large trading volume. Market makers play a major role as a distribution channel between the issuer and investors. In addition, market makers are also the ones who provide bid and offer prices, creating standard prices on the market.

Commercial banks, as financial intermediaries, are the places where capital flows between personal and organizational savings deposits to organizations in need of capital; at the same time, commercial banks with large financial potential in the market are the most suitable organizations to become market makers and operate effectively in the government bond market. This has contributed to answering questions and concerns about the important position and market share of commercial banks in the Vietnamese government bond market in recent times./.

Red River