What the mandate is meant to do
In a thinly traded share, the spread between the best bid and offer can be wide and even a small order may move the price. A liquidity provider normally commits to quote on both sides for a defined part of the trading day, subject to maximum spread and minimum volume. The agreement and marketplace programme set the precise obligations.
The service does not create investor demand and cannot guarantee turnover, a share price or execution of a large order. Duties may be limited during rapid markets, trading halts or exceptional conditions. It must never be used to hold the price at a chosen level; all activity remains subject to MAR and the prohibition on market manipulation.
Agreement and monitoring
Understand the counterparty, covered instruments, permitted interruptions, reporting, fees and termination. Public communications should describe the purpose without promising an outcome. Monitor actual spread, presence and trading patterns against the agreement. A liquidity provider can be useful for a smaller issuer but does not replace clear disclosure, investor relations or adequate shareholder distribution.
Agree who inside the company reviews the provider’s reports and how suspected deviations or unusual trading patterns are escalated.