Liquidity providing

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Al Ramz has introduced a solution where companies benefit from higher liquidity on screen and increase the visibility of shares

editor's pickMonday 17, September 2018

Liquidity risk or the risk that shares may be difficult to sell at a reasonable price, is an increasing concern faced by investors across the region. Working alongside local regulators, Al Ramz has introduced a liquidity providing solution to reduce this risk for investors and has been offering this to corporates across the Emirates since early 2017.  Al Ramz was the first company to obtain a licence as a market maker on ADX in 2016 and the first company to launch its Liquidity Provision service on the ADX in 2017. Since then, Al Ramz has been active across both the DFM and ADX and was recently awarded “Best Market Maker in the Middle East” at the Banker Middle East Industry Awards 2018. 

In a region where investors have historically struggled with liquidity, the Liquidity Provision product offers companies the means to guarantee a tight bid/ask spread and increase the daily turnover of shares which in turn renders investment less risky and reduces the cost of capital. From a universe of the 100 largest listed companies across the UAE, over 70 per cent demonstrates symptoms of inadequate liquidity. Al Ramz is partnering with such companies to improve the liquidity of their underlying shares, increase average daily trading volumes and reduce bid/ask spreads resulting in improved price performance, and increased liquidity.  Al Ramz measures liquidity via three “Liquidity Metrics”: average bid/ ask spread, average daily turnover and annualised historical price volatility of share price. Al Ramz Liquidity Providing product aims to improve each of these metrics. As a result, investing in a covered company’s share is made more attractive to sophisticated investors having certain liquidity criterion that need to be met.  Increasing the investor base of a share will in turn increase research coverage. 

All the above contribute to the overall goal of increasing a company’s visibility in the market and ultimately will reduce the cost of capital.  “The goal in offering this product is to help issuers improve the liquidity of their shares, and secondly to provide our clients with the services that they need. We have invested in talent and systems to a point where we are confident we now offer an excellent value proposition to our clients. Not only do they benefit from higher liquidity on screen, but they also gain unparalleled access to Al Ramz Client Network and our Research Department, which also helps increase the visibility of their shares. We are excited to grow this business over the coming months and look forward to helping more companies improve the liquidity of their underlying shares,” said Mohammad Al Mortada Al Dandashi, Managing Director of Al Ramz Corporation. 

TAGS : ADX, Al Ramz, UAE

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