Stock Market Making Mechanisms
I. Background
Stock market making mechanisms are widely adopted to boost market trading volume and liquidity. Taiwan mechanisms focus on quality stocks with low liquidity and are designed by making reference to those of Singapore and Korea. The mechanisms are expected to be rolled out by the end of June 2021.
II. Introduction
Every year the TWSE selects the stocks meeting certain criteria regarding profitability, trading volume, turnover ratio, and dividends. Listed companies covering various industrial groups are selected yearly. However, the final results will not be disclosed by the TWSE.
In the early phase of the mechanisms, securities dealers can apply annually to serve as market makers or liquidity providers. The TWSE provides incentives such as trading fee rebate to encourage market makers to provide stock trading quotations and liquidity providers to play an active role in trading such stocks. The mechanisms are expected to increase the liquidity of the stock market and achieve the goal of "circulating securities and prospering the economy.”