The Rwanda Capital Market Advisory Council (CMAC) needs market makers to create liquidity on the Rwanda Over the Counter Market, say some British Conservative Party members.
In an open discussion with CMAC on Friday last week, a team of six conservatives advised that if Rwanda is to have a vibrant capital market which will play a pivotal role in the development of the finance sector which is central to economic development, confidence must be built in investors and savers.
The CMAC and Rwanda Over The Counter Market were launched early this year but have since faced challenges of liquidity, low trading, few products on the market and limited capacity in terms of operating environment.
Some 105 Conservative Party members are in Rwanda to provide voluntary capacity-building services.
They say that this confidence will be created by putting in place pertinent infrastructures like the rules and the legal framework and adequate disclosure requirements for listing securities.
According to the conservatives, confidence in the market can also be created through market makers who can assume some risk on securities in return of small profits in order to add the liquidity of the market and depth.
A market maker is a dealer firm that accepts the risk of holding a certain number of securities in order to ease trading of those securities.
The market maker presents buy and sell quotations for a guaranteed number of securities.
Ben Jimson, head of the delegation, said that if more commercial banks can be involved in the market especially in underwriting the issued securities, it can help in building confidence.
“Commitment to market making is required,” he said.
The conservatives also advised the CMAC to try and lure more investors outside Rwanda so as to have more capital channeled where it is more productive.