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Back to topA new Indonesian Financial Services Authority Regulation sets out new guidelines on the routine sale and purchase of securities by securities companies and other entities approved by OJK.
The new rules aim to support trading liquidity while such activities would not be deemed as market manipulation practices.
BACKGROUND
Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or OJK) has issued Regulation No. 18 of 2024 on Liquidity Providers (OJK Regulation 18), which takes effect on 8 May 2025.
OJK Regulation 18 revokes existing provisions on liquidity providers set out in (i) OJK Regulation No. 32/POJK.04/2020 on Securities Derivative Contracts and (ii) OJK Regulation No. 8/POJK.04/2021 on Structured Warrants, signalling a wider role for liquidity providers in Indonesia’s capital markets.
LIQUIDITY PROVIDERS
OJK Regulation 18 states that liquidity providers are approved by the Indonesia Stock Exchange (IDX) to trade IDX-permitted securities in order to promote liquidity by providing continuous quotations for these securities. In essence, the role of a liquidity provider is to consistently place bids and offers on certain IDX-permitted securities, so improving the trading liquidity of these securities.
While OJK Regulation 18 adopts a broad definition of “liquidity providers”, they must be either (a) an Indonesia-licensed securities broker-dealer or (b) another party approved by OJK (to be further regulated in an OJK implementing regulation).
HOW LIQUIDITY PROVIDERS CAN FACILITATE EXIT FROM IDX WATCHLIST
Under Regulation I-X, which is an annex to IDX Board of Directors Decision No. Kep-00076/BEI/06-2024 of 2024 on Placement of Equity Securities on the IDX Watchlist Board (Watchlist), listed companies that have been placed on the IDX Watchlist for either failing to meet the minimum free float requirements or because of low trading liquidity may be removed from the Watchlist if (i) their securities are listed as liquidity provider securities, and (ii) they already have a liquidity provider.
OJK Regulation 18 lays the groundwork for the IDX to issue an implementing regulation giving effect to this exit option, which had been effectively unavailable due to the lack of an underlying OJK regulation. We understand that the IDX regulation being contemplated is now in process.
ONGOING MINIMUM FREE FLOAT REQUIREMENT REMAINS IN EFFECT
Listed companies that have been removed from the IDX Watchlist in this manner must continue to satisfy ongoing minimum free float requirements. If they fail to do so, they will face IDX sanctions, which may include an administrative fine of up to 500 million rupiah (~US$30,000) and suspension of trading.
CONCLUSION
OJK Regulation 18 marks the first step towards an alternative solution for listed companies to be removed from the IDX Watchlist, subject to the issuance of the relevant IDX implementing regulation.
It remains to be seen how IDX will further regulate liquidity providers, and how effective this alternative solution will be in resolving issues related to free float requirements and low trading liquidity.
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Please reach out to your usual contacts if you have any questions on how this might affect your business.
