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 CNV and the self-regulated entities should regulate their performance, which would not fall within the article of "market manipulation and deceit". Within the above framework, the Stock Market of Buenos Aires (Mercado de Valores de Buenos Aires S.A.) incorporated the figure of Market Maker through Circular 3514 which came into force on 5 December 2006, in order to promote the operation of the PyMEs Board. In addition, the Forward Market of Buenos Aires (Mercado a Término de Buenos Aires) regulated its performance in 2012.

Finally, the Resolution establishes minimum standards that markets’ regulations must contain regarding the Market Maker activity, granting a wide margin in the definition and determination of the particular and specific conditions of the performance of Market Maker:

  1. Requirements to be met by Clearing and Settlement Agents for registration as Market Makers and validity of  registration;
  2. Whether the performance in such capacity is exclusive of a Settlement and Compensation Agent by security or whether a plurality of Market Makers will be allowed to perform within the same security, and if each Market Maker may perform in such capacity in only one or several securities;
  3. The securities quoted in the Market, in respect of which each Market Maker must operate;
  4. Exhibition of rights, obligations and income of Clearing and Settlement Agents registered as Market Makers;
  5. Income that the Market Maker will perceive for performance;
  6. Minimum presence requirement during the trading session by the Market Maker;
  7. Indication of the maximum spread between purchase and sale offers that may be held by security during presence in the trading session;
  8. Minimum stay of the offers corresponding to orders of Market Makers’ customers on the screens of trading systems, prior to those offers being applied to Market Makers’ offers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.