Íslandsbanki hf. has signed market-making agreements with Arion bank hf., Kvika hf., and Landsbankinn regarding covered bonds issued by Íslandsbanki on NASDAQ Iceland.
The purpose of the agreement is to promote trading with the bonds covered by the agreement in order to increase their liquidity and encourage transparent price formation.
The market makers will place bid and ask orders for the bonds every day. Market makers are not obliged to submit bids and asks for new bond series until the series has reached ISK 3 billion and the minimum bid /ask size shall be ISK 20 million until the series has reached ISK 5 billion, when the minimum shall increase to ISK 60 million until the series has reached ISK 10 billion and then the minimum shall be ISK 80 million. Also, for those series not offered for sale via auction for the past twelve months the minimum bid/ask size shall be ISK 60 million and the minimum bid/ask size for ISLA CBI 30 shall be ISK 40 million.
Individual market makers are released from their obligations on a particular trading day once the trading volume (specified as "AUTO") of that particular market maker totals ISK 500m for all series of covered bonds issued by Íslandsbanki.
The maximum bid-ask spread depends on the number of years to maturity at any given time in accordance with the table below.
Inflation-linked series that are prohibited from further issuance, according to the Central Bank of Iceland's rule no. 492/2001 on indexation of savings and loans, as subsequently amended, are exempt from the aforementioned obligations on maximum spread.
In conjunction with the market-making agreements, Íslandsbanki will provide the market makers with bond lending facilities.
Further information can be found in Stock exchange announcement: Kauphallarhlekkur