EFG Hermes Launches Market Making on Dubai Shares

EFG Hermes has launched market making and liquidity provision services on shares listed on the Dubai Financial Market, a move expected to deepen trading volume and narrow the bid-ask spread.

This development follows the close of UAE markets, which was previously covered by "60 Arabia," as the Dubai Financial Market index ended Friday's session at around 5,818 points, while the Abu Dhabi General Index fluctuated between approximately 9,795 and 9,808 points.

The market making mechanism relies on a specialized entity placing continuous buy and sell offers on securities to ensure a counterparty is available most of the time and to reduce instantaneous price volatility, which is expected to gradually attract traders and institutional investors to the Dubai market.

Investors in UAE markets in general are interested in this development, as improving liquidity and narrowing the bid-ask spread makes the market more efficient, making it easier for large position holders to enter and exit without severely impacting prices.

What do these terms mean?

Market Making: An activity undertaken by a specialized entity that places continuous bid and ask offers on a specific stock to ensure a counterparty exists for every order and to reduce price volatility.

Liquidity Provision: Injecting buy and sell orders with close prices to facilitate trade execution in the market without a long wait for a counterparty.

Bid-Ask Spread: The difference between the highest price buyers offer and the lowest price sellers ask, where its narrowing is an indicator of greater market depth.