Government attacks the lack of liquidity in the Colombian stock market

Through Decree 1239, the Ministry of Finance gave new impetus with regulations to help generate greater liquidity in the Colombian stock marketwhich in recent months has been under the scrutiny of international entities.

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According to government sources, the 43 articles of the issued standard highlight several aspects that seek to improve the depth and formation of prices.

One of them is the relaxation of the conditions that stock brokerage companies must meet to offer the securities financing service to clients.

Likewise, it makes adjustments to the requirements for carrying out short sales, it also creates the regulations applicable to recurring securities lending programs, carries out an update of the figure of the liquidity trainer and adjustments to simplify the requirements that stock brokerage companies must meet with their clients when providing advice.

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According to Wilson Tovar, Stocks and Securities Research Manager, the decree explicitly mentions the need to improve the liquidity of the stock market. This suggests that the rule arises as a response to the Government’s concern about low investor participation and limited market depth. The inclusion of new instruments and improvements In operations such as short sales, they seek to generate more activity and dynamism in the market.

He assures that one of the main motivations is to democratize access to markets, making it easier for companies and investors to find better financing and investment conditions. This can be seen as a response to the growing demand for financing from sectors such as SMEs.
Tovar adds that the aim is to strengthen financial inclusion, especially in the popular economy, which indicates an effort to align capital market regulations with government policies focused on economic inclusion and the development of less-served sectors.

Greater requirements are also established to prevent conflicts of interest and improve transparency. This reflects the government’s intention to protect investors and foster a more reliable market, which is key to attracting new participants.

For the Actions & Securities analyst, regarding the main modifications, the participation of entities that can act as liquidity generators is expanded, allowing more institutions to offer buying and selling positions in the market, which improves competitiveness and the formation of more efficient prices.

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It also facilitates the operation of short sales, which can contribute to generating greater activity and investment options. This is essential to develop a more robust market that allows not only traditional transactions, but also hedging and speculation strategies.

Stock brokerage companies now have more tools to provide financing fast and accessible to investors, which can boost investments in the market, facilitating access to resources for small and medium-sized companies.

The conditions for recurring bond issues are also adjusted and the issuance of these by credit establishments is facilitated. which is probably related to the need to encourage investment and finance large projects.

The standard seeks more participation and diversification of investors and by improving liquidity allows the participation of more entities and more competition.

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Colombia Stock Exchange

Abel Cárdenas / Portfolio

‘Attacks three key issues’

Andrés Restrepo, manager of the nuam Colombian Stock Exchange, says that the standard addresses several issues to improve liquidity.

The first is that it is key that in any market there are agents that generate liquidity at all times, which has to do with short sales and associated with the temporary transfer of securities or securities lending with operational improvements. He says that liquidity programs are expandedgives the opportunity for them to be done, opens the space to other assets and participants and gives clarity on the issue of advice to clients.

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HOLMAN RODRÍGUEZ MARTÍNEZ
Portfolio