Every targeted market intervention carries an implicit question: what happens when the intervention stops? Singapore’s GEMS Market Making Grant, which runs until 31 December 2028, is no exception. The S$20 million commitment is designed to seed two-sided quoting in around 80 small- and mid-cap stocks, but its long-term value depends on whether those stocks develop a self-sustaining liquidity base that does not require external support. That is a fundamentally different challenge from simply tightening spreads in the short term.
The Difference Between Quoted Liquidity and Owned Liquidity
Quoted liquidity is what appears on the screen: a bid and an offer, placed by a market maker, available for execution. Owned liquidity is what remains when the market maker steps away: a diverse base of investors who hold the stock, trade it regularly and provide natural two-sided interest. The grant can produce the former relatively reliably. The latter depends on factors that lie largely outside the market maker’s control—the company’s free float, its investor relations effort, its index eligibility, its sector appeal and the availability of research coverage. A stock can have a tight quoted spread and still be effectively illiquid if the quoted size is small and the underlying holder base is concentrated. The durability test is whether the grant catalyses an increase in owned liquidity, not merely quoted liquidity.
The Ecosystem Conditions for Durable Liquidity
MAS has been explicit that the market-making grant is one component of a broader equities market review, not a standalone solution. The conditions that support durable liquidity are cumulative. A larger free float reduces the scarcity value of individual blocks and makes continuous quoting more viable. Broader analyst coverage gives investors a reason to include a stock in their opportunity set. Index inclusion creates structural demand from passive funds. A credible listing pipeline ensures that the market is not merely recycling a fixed set of securities. The grant can improve the trading environment for existing stocks, but it cannot compensate for deficiencies in these underlying conditions. The most successful outcome would be a virtuous circle: tighter spreads attract more investors, which deepens the holder base, which in turn makes market making more commercially viable without subsidy.
What the Early Data Suggests
The broader liquidity picture is already improving. In FY2026, SGX’s daily average securities value rose 35% to S$1.8 billion, the highest in 18 years, and small- and mid-cap daily average trading value jumped 155% to S$310 million. Average daily trading volumes have exceeded S$2 billion, more than 40% higher than in 2025, and turnover among the Next 50 constituents has increased 93%. These figures indicate that the demand-side measures—particularly the EQDP’s S$5.4 billion in allocations—are beginning to move activity beyond the very largest stocks. The market-making grant is designed to reinforce that shift by ensuring that the improved demand can be translated into executed trades at reasonable costs. But the data also shows how far the small-cap segment still lags in absolute terms. A 155% increase from a low base is encouraging; it is not yet a structural transformation.
The Risk of a “Quote-and-Fade” Outcome
The principal risk is that market makers satisfy their quoting obligations while the grant is active, then reduce their presence once the incentive ends. If the stocks in the programme have not developed a broader investor base by 2028, the spreads could widen again and the liquidity could revert to pre-grant levels. This is not a hypothetical concern. Market-making programmes in other jurisdictions have sometimes produced a temporary improvement in quoted metrics without a lasting change in the underlying investor base. The defence against this outcome is selectivity and conditionality: tying continued support to measurable improvements in depth, trade size and holder diversity, rather than merely the presence of quotes. MAS’s commitment to reviewing the eligible stock list regularly provides a mechanism for this kind of adaptive management. The grant’s design should reward market makers for contributing to durable liquidity, not just for filling the screen.
The Institutional Learning Curve
There is also a learning dimension for issuers. A company that receives market-making support has an opportunity to engage more actively with investors—through results briefings, capital markets days and improved disclosure—to convert quoted liquidity into genuine demand. The grant is not a substitute for investor relations; it is a platform that makes investor relations more effective. Issuers that treat the programme as a passive subsidy are likely to see little lasting benefit. Those that use the improved trading environment to broaden their shareholder base may emerge with a more resilient market for their shares. The official MAS announcement sets out the framework and the review process for eligible stocks: https://www.mas.gov.sg/news/media-releases/2026/MAS-Appoints-Third-Batch-of-EQDP-Asset-Managers.
The Long Game
Singapore’s equity market revival is not a single-event problem, and it will not be solved by a single grant. The market-making experiment is best understood as a bridge between the current state of thin small-cap trading and a future state in which a broader base of investors, issuers and intermediaries interact without artificial support. Whether that bridge holds depends on what happens on the other side—not just on how many quotes appear on the screen while the grant is active.
