The challenges of attracting market makers to the Malta Stock Exchange

Abstract

The purpose of this paper is to discover the challenges to attracting market makers to the Malta Stock Exchange. This will be done carrying out unstructured interviews with the members of the Malta Stock Exchange. It was discovered that whilst there is relatively strong interest among the members of the stock exchange to undertake market making activities for Maltese securities, the members have yet to be convinced that it could be done profitably. There are a variety of reasons this is the case, which can be grouped into the following areas: Liquidity, structure, culture and risk. These findings suggest that the topic is subject to a causality dilemma, one in which market makers are desired to improve the liquidity of Maltese capital markets, but improved liquidity of Maltese capital markets is desired to attract market makers. This paper concludes that ultimately if market makers are to be attracted, market conditions would first have to improve sufficiently to encourage the members of the Malta Stock Exchange to begin market making. This implies that the Malta Stock Exchange is going to have to be willing to be proactive if it is to succeed in attracting market makers. The challenge for the Malta Stock Exchange is significant and will require firstly further research into how it can achieve this and ultimately action to be taken on different fronts, simultaneously.