OJK Regulation No. 18 of 2024 on Liquidity Providers

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 18 OF 2024
CONCERNING
LIQUIDITY PROVIDERS
BY THE GRACE OF GOD THE ALMIGHTY,
THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering: a. that for the deepening of the financial market and increasing the liquidity of securities traded through market organizers, it is necessary to conduct liquidity provider activities to meet the needs of capital market participants; b. that to provide a legal basis for liquidity provider activities, it is necessary to establish certain measures covering the continuous sale and purchase of securities by securities companies or other parties to maintain the liquidity of securities trading at market organizers;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning Liquidity Providers;
Recalling: 1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608) as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253) as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);
https://jdih.ojk.go.id/

RESOLVING:
Determining: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING LIQUIDITY PROVIDERS.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:
1. Securities are financial instruments or investment contracts, whether conventional or digital or other forms in accordance with technological developments, that give rights to their owners to directly or indirectly obtain economic benefits from the issuer or from specific parties based on agreements and any derivatives of Securities, which can be transferred and/or traded in the capital market.
2. Party refers to an individual, legal entity, company, joint venture, association, or organized group.
3. Securities Broker is a Party that conducts business activities of buying and selling Securities for its own behalf or for other Parties.
4. Market Organizer is a Party that organizes and provides systems and/or facilities to bring together Parties conducting transactions on Securities or financial instruments in the capital market or organized financial market.
5. Quotation is the process of continuously entering sell offers and buy demands for Securities.
6. Liquidity Provider, hereinafter referred to as Liquidity Provider, is a Party that has obtained approval from the Market Organizer to trade Securities and has the obligation to perform Quotations on specific Securities determined by the Market Organizer to support the creation of liquidity in the trading of such Securities.
7. Affiliation refers to:
a. family relationships due to marriage up to the second degree, both horizontally and vertically, namely the relationship of a person with:
1. husband or wife;
2. parents of the husband or wife and the husband or wife of the child;
3. grandparents of the husband or wife and the husband or wife of the grandchild;
4. siblings of the husband or wife along with the husband or wife of the sibling in question; or
5. husband or wife of the sibling of the person in question;
https://jdih.ojk.go.id/ b. family relationships due to lineage up to the second degree, both horizontally and vertically, namely the relationship of a person with:
1. parents and children;
2. grandparents and grandchildren; or
3. siblings of the person in question;
c. relationships between the party and employees, directors, or commissioners of that party;
d. relationships between 2 (two) or more companies where there is one or more members of the board of directors, management, board of commissioners, or supervisors that are the same; e. relationships between a company and a party, whether directly or indirectly, in any way, controlling or being controlled by the company or that party in determining the management and/or policies of the company or party in question; f. relationships between 2 (two) or more companies that are controlled, whether directly or indirectly, in any way, in determining the management and/or policies of the company by the same party; or g. relationships between a company and a major shareholder, namely a party that directly or indirectly owns at least 20% (twenty percent) of the shares with voting rights of that company.
8. Short Selling Transaction is a securities sale transaction where the Securities in question are not owned by the seller at the time the transaction is executed.
9. Securities Derivative Contract is a contract that grants or imposes rights and/or obligations on the Parties to buy or sell a certain amount of underlying assets at a specific price and time.
10. Underlying refers to Securities, a Securities index, a group of Securities, or an index of a group of Securities that serves as the basis for a Securities Derivative Contract transaction.

CHAPTER II
REQUIREMENTS AND PROHIBITIONS FOR LIQUIDITY PROVIDERS
Article 2
(1) Parties that can conduct activities as a Liquidity Provider include:
a. Securities Brokers; and b. Other Parties approved by the Financial Services Authority.
(2) Securities Brokers conducting activities as a Liquidity Provider as referred to in paragraph (1) letter a must fulfill the following requirements:
a. obtaining a business license as a Securities Broker from the Financial Services Authority; and https://jdih.ojk.go.id/ b. obtaining approval from the Market Organizer as a Liquidity Provider. (3) Other Parties conducting activities as a Liquidity Provider as referred to in paragraph (1) letter b must fulfill the following requirements:
a. obtaining approval from the Financial Services Authority to conduct Liquidity Provider activities; and b. obtaining approval from the Market Organizer as a Liquidity Provider.
(4) In addition to fulfilling the requirement provisions as referred to in paragraphs (2) and (3), Securities Brokers and Other Parties conducting activities as a Liquidity Provider must fulfill the requirement provisions as a Liquidity Provider. (5) Further provisions regarding the requirements and procedures for approving Other Parties becoming Liquidity Providers are determined by the Financial Services Authority.

Article 3
Securities Brokers or Other Parties that have obtained approval from the Market Organizer as a Liquidity Provider must provide liquidity in the trading of Securities at the Market Organizer by performing Quotations on specific Securities determined by the Market Organizer.

Article 4
In conducting liquidity provision activities in Securities trading as referred to in Article 3, Liquidity Providers must conduct Securities trading that is regular, fair, and efficient.

Article 5
Quotations of specific Securities conducted by Liquidity Providers and meeting the procedures established by the Market Organizer are not considered prohibited actions as referred to in Article 91 and Article 92 of Law Number 8 of 1995 concerning the Capital Market as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector.

Article 6
The implementation of Quotations on specific Securities by Liquidity Providers is conducted after obtaining approval from the Market Organizer.

Article 7
Liquidity Providers are prohibited from conducting and/or having agreements in any form with other Parties to conduct market manipulation activities and create false impressions at the Market Organizer. https://jdih.ojk.go.id/

Article 8
(1) In the event that a Liquidity Provider performs Quotations on Securities issued by an Affiliate of the Liquidity Provider and has the potential to cause a conflict of interest, the Liquidity Provider must disclose information to the public. (2) Liquidity Providers that hold Securities issued by an Affiliate of the Liquidity Provider due to Quotations in paragraph (1) must sell back the Securities within a maximum of 6 (six) months since the application for the Securities to be quoted, with transaction volume limits to be determined by the Market Organizer.

Article 9
(1) Any Party that violates the provisions as referred to in Article 2 paragraph (2), paragraph (3), paragraph (4), Article 3, Article 4, Article 7, and Article 8 shall be subject to administrative sanctions. (2) Sanctions as referred to in paragraph (1) shall also be imposed on Parties that cause the occurrence of violations as referred to in paragraph (1). (3) Sanctions as referred to in paragraphs (1) and (2) shall be imposed by the Financial Services Authority. (4) Sanctions as referred to in paragraph (1) consist of:
a. written warnings; b. fines, namely the obligation to pay a certain amount of money;
c. restrictions on business activities;
d. suspension of business activities; e. revocation of business licenses; f. cancellation of approvals; and/or g. cancellation of registrations.
(5) Administrative sanctions as referred to in paragraph (4) letters b, c, d, e, f, or g may be imposed with or without prior imposition of administrative sanctions in the form of written warnings as referred to in paragraph (4) letter a. (6) Administrative sanctions in the form of fines as referred to in paragraph (4) letter b may be imposed separately or together with the imposition of administrative sanctions as referred to in paragraph (4) letters c, d, e, f, or g. (7) The procedures for imposing sanctions as referred to in paragraph (3) shall be carried out in accordance with the provisions of legislation in the field of capital markets.

CHAPTER III
SHORT SELLING TRANSACTIONS BY LIQUIDITY PROVIDERS
Article 10
(1) The Market Organizer determines the Securities that can undergo Short Selling Transactions by Liquidity Providers.
(2) Short Selling Transactions by Liquidity Providers may be conducted against:
a. shares that are Quoted by Liquidity Providers; b. Underlyings of Securities Derivative Contract trading; or
c. Underlyings of structured warrants.
(3) The sell offer price entered into the trading system of the Market Organizer in conducting Short Selling Transactions on shares that are Quoted, Underlyings of Securities Derivative Contract trading, or Underlyings of structured warrants, does not have to be above the price occurring at the Market Organizer. (4) Short Selling Transactions on shares conducted by Liquidity Providers are exempt from the obligations of Securities Brokers conducting Short Selling Transactions for their own behalf as regulated in the Financial Services Authority Regulation concerning Securities Financing Transactions by Securities Companies for Clients and Short Selling Transactions by Securities Companies.

CHAPTER IV
REGULATION AND SUPERVISION OF LIQUIDITY PROVIDERS BY MARKET ORGANIZERS
Article 11
(1) Market Organizers further regulate requirements and approvals, rights and obligations, imposition of sanctions, and revocation of Liquidity Provider activities in their Market Organizer regulations. (2) Market Organizer regulations regarding Liquidity Providers as referred to in paragraph (1) must at least regulate:
a. Securities that can be Quoted by Liquidity Providers; b. Quotation provisions by Liquidity Providers;
c. requirements for Securities Brokers or Other Parties becoming Liquidity Providers;
d. separation of Quotations as a Liquidity Provider and as a Securities Broker; e. rights and obligations of Liquidity Providers; f. mechanisms for information disclosure by Liquidity Providers; g. provisions regarding the cessation of Liquidity Provider activities; h. minimum provisions that must be fulfilled by Liquidity Providers and mechanisms for resolution in conducting Short Selling Transactions; and
i. provisions regarding the obligation of Liquidity Providers to administer, store, and maintain records, books, and data on:

1. daily Securities transaction records; and
2. records of Securities lending and borrowing activities arising from their activities as Liquidity Providers.
   https://jdih.ojk.go.id/
   (3) In determining the Securities that can be traded by Liquidity Providers as referred to in paragraph (2) letter a, the Market Organizer considers at least:
   a. transaction volume; b. transaction frequency;
   c. market capitalization;
   d. price fraction range of Securities; e. floating-share ratio; and f. fundamental aspects of Securities.
   (4) Market Organizers must submit reports regarding daily Securities transaction records and Securities lending and borrowing activity records as referred to in paragraph (2) letter i to the Financial Services Authority through facilities provided by the Financial Services Authority. (5) Records, books, and data as referred to in paragraph (2) letter i must be available for inspection purposes and stored for at least 5 (five) years. (6) Market Organizer regulations regarding Liquidity Providers must first obtain approval from the Financial Services Authority.

Article 12
Market Organizers must supervise the activities of Liquidity Providers.

Article 13
(1) Any Party that violates the provisions as referred to in Article 11 paragraph (4), paragraph (5), paragraph (6), and Article 12 shall be subject to administrative sanctions.
(2) Sanctions as referred to in paragraph (1) shall also be imposed on Parties that cause the occurrence of violations as referred to in paragraph (1).
(3) Sanctions as referred to in paragraphs (1) and (2) shall be imposed by the Financial Services Authority.
(4) Sanctions as referred to in paragraph (1) consist of:
a. written warnings; b. fines, namely the obligation to pay a certain amount of money;
c. restrictions on business activities;
d. suspension of business activities; e. revocation of business licenses; f. cancellation of approvals; and/or g. cancellation of registrations.
(5) Administrative sanctions as referred to in paragraph (4) letters b, c, d, e, f, or g may be imposed with or without prior imposition of administrative sanctions in the form of written warnings as referred to in paragraph (4) letter a. (6) Administrative sanctions in the form of fines as referred to in paragraph (4) letter b may be imposed separately or together with the imposition of administrative sanctions as referred to in paragraph (4) letters c, d, e, f, or g. (7) The procedures for imposing sanctions as referred to in paragraph (3) shall be carried out in accordance with the provisions of legislation in the field of capital markets.

CHAPTER V
OTHER PROVISIONS
Article 14
In addition to administrative sanctions as referred to in this Financial Services Authority Regulation, the Financial Services Authority may take specific actions against any Party that violates the provisions of this Financial Services Authority Regulation.

Article 15
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in this Financial Services Authority Regulation and specific actions as referred to in Article 14 to the public.

CHAPTER VI
CLOSING PROVISIONS
Article 16
At the time this Financial Services Authority Regulation comes into force:
a. provisions regulating Liquidity Providers as referred to in Article 10 letter h and Article 12 paragraph (2) of Financial Services Authority Regulation Number 32/POJK.04/2020 concerning Securities Derivative Contracts (State Gazette of the Republic of Indonesia Year 2020 Number 129, Supplement to the State Gazette of the Republic of Indonesia Number 6513); and b. provisions regulating Liquidity Providers as referred to in Article 36 paragraph (2) and Article 39 letter e of Financial Services Authority Regulation Number 8/POJK.04/2021 concerning Structured Warrants (State Gazette of the Republic of Indonesia Year 2021 Number 82, Supplement to the State Gazette of the Republic of Indonesia Number 6672), are repealed and declared invalid.

Article 17
This Financial Services Authority Regulation shall come into force 6 (six) months from the date of its promulgation. https://jdih.ojk.go.id/

signed signed
This copy is in accordance with the original
Director of Legal Development
Legal Department
Aat Windradi signed
To ensure everyone knows, ordering the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Determined in Jakarta on October 31, 2024
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,
MAHENDRA SIREGAR
Promulgated in Jakarta on November 8, 2024
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
SUPRATMAN ANDI AGTAS
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2024 NUMBER 28/OJK https://jdih.ojk.go.id/

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 18 OF 2024
CONCERNING
LIQUIDITY PROVIDERS
I. GENERAL
Liquidity is one of the important factors in the trading of Securities in the capital market. Liquidity is generally used to describe how liquid a financial transaction is. High levels of Securities liquidity, especially those traded through Market Organizers, are one of the determining variables that can drive increased trading of Securities, thereby supporting market deepening and price discovery. In the context of Securities trading in the capital market, the term liquidity is generally understood as how quickly a Security is bought and sold within a certain period. A Security is considered liquid when the level of demand and supply for such Security is high, making it easy to trade. In current Securities trading practices in Indonesia, there are several variables indicating that the level of liquidity in capital market Securities trading is still low, seen from the small number of shares that are consistently on the Indonesia Stock Market Index (LQ 45) list as shares with high liquidity levels, and the large number of listed companies whose shares are included in the special monitoring board of the Indonesia Stock Exchange. Referring to these conditions and considering the importance of Securities liquidity, one of the mechanisms that can be applied to increase liquidity for illiquid Securities is through the Liquidity Provider scheme. A Liquidity Provider is a party that conducts buy and sell Quotations on a Security to ensure continuous trading over a certain period, thereby increasing liquidity. With the activity of Liquidity Providers, it can also maintain the stability of Security prices in the market from falling or rising significantly due to imbalances in buy and sell offers, so that the price formation process can be more optimal. That the activities of Liquidity Providers in providing Securities liquidity in the market have the potential to fulfill elements of criminal acts as regulated in Article 91 and Article 92 of Law Number 8 of 1995 concerning the Capital Market as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, which regulate the prohibition of actions that directly or indirectly create false impressions regarding trading activities, market conditions, or Security prices at Market Organizers. But further in Article 94 of Law Number 8 of 1995 concerning the Capital Market as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, the Financial Services Authority is given the authority to establish certain measures that can be conducted by Securities Companies and/or other Parties that are not prohibited actions as referred to in Article 91 and Article 92 of Law Number 8 of 1995 concerning the Capital Market as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, one of which is the continuous sale and purchase of Securities by Securities Companies or Service Users as market makers
for their own accounts to maintain the liquidity of Securities trading at market organizers. Based on the above background, in order to increase liquidity and deepen the financial market and provide a legal basis for Liquidity Provider activities, it is necessary to create regulations regarding the scope and mechanisms of Liquidity Provider activities and to establish the continuous buy and sell Quotation activities by Liquidity Providers as activities exempt from Article 91 and Article 92 of Law Number 8 of 1995 concerning the Capital Market as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, by issuing a Financial Services Authority Regulation concerning Liquidity Providers.

II. ARTICLE BY ARTICLE
Article 1
Clearly sufficient.
Article 2
Clearly sufficient.
Article 3
Clearly sufficient.
Article 4
What is meant by "regular, fair, and efficient Securities trading" is a trading conducted based on clear rules and implemented consistently.
Efficient Securities trading is reflected in the quick settlement of transactions with relatively low costs.
Article 5
Clearly sufficient.
Article 6
What is meant by "approval" is that the Market Organizer will give approval to the Liquidity Provider to perform Quotations on each specific Security to be quoted for liquidity provision. https://jdih.ojk.go.id/
Article 7
What is meant by "market manipulation and creating false impressions" is actions, whether direct or indirect, with the aim of creating false or misleading impressions regarding trading activities, market conditions, or Security prices at the Market Organizer.
Article 8
Paragraph (1)
Information disclosure is implemented at the time of the application for the submission of Securities to be quoted by the Liquidity Provider.
Paragraph (2)
Clearly sufficient.
Article 9
Clearly sufficient.
Article 10
Clearly sufficient.
Article 11
Paragraph (1)
Clearly sufficient.
Paragraph (2)
Clearly sufficient.
Paragraph (3)
Clearly sufficient.
Paragraph (4)
Facilities provided by the Financial Services Authority include, among others, the reporting system owned by the Financial Services Authority or data sharing facilities between the Financial Services Authority and Market Organizers. Paragraph (5) Clearly sufficient. Paragraph (6) Clearly sufficient.
Article 12
Clearly sufficient.
Article 13
Clearly sufficient.
Article 14
Specific actions include, among others, orders to correct errors, conditions, and/or states arising from violations.
Article 15
Clearly sufficient.
Article 16
Clearly sufficient. https://jdih.ojk.go.id/
Article 17
Clearly sufficient.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 96/OJK https://jdih.ojk.go.id/