Affirming the role of market makers

(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 TPCP market in depth and in line with international trends and practices is an urgent requirement, in which the solution of developing a system of market makers is one of the important solutions.

The market maker plays the role of distributing capital between the issuer and investors in the primary market by participating in the bidding sessions for the issuance of government bonds, supporting and creating a stable demand for government bonds in the primary market. This is also the underwriter of the issuance of government bonds when grasping the demand for bond investment of investors and the ability of the issuer to issue government bonds; This is also the person who provides 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 clearly define 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 necessary to develop the government bond market in a sustainable and stable manner. To establish this system, the Government needs to establish the best supporting environment for market makers to operate effectively and the basic conditions for establishing a system of market makers.

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 the 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