Abu Dhabi bourse to launch short-sell­ing

Kuwait Times - - BUSINESS -

Abu Dhabi’s stock mar­ket plans to in­tro­duce cov­ered short-sell­ing in the first quar­ter of 2017, its chief ex­ec­u­tive said yes­ter­day, as it seeks to boost liq­uid­ity and at­tract more for­eign in­vestors.

In cov­ered short-sell­ing, in­vestors bor­row shares and sell them in the ex­pec­ta­tion of re­pur­chas­ing them later at a lower price. Reg­u­la­tors in the Gulf have un­til now shied away from al­low­ing the prac­tice be­cause of con­cern that it could desta­bilise mar­kets, though some coun­tries in­clud­ing Saudi Ara­bia and Qatar have said they plan to in­tro­duce it.

The Abu Dhabi Se­cu­ri­ties Ex­change (ADX) said yes­ter­day it had held meet­ings with bro­ker­ages in Abu Dhabi and Dubai ahead of the launch of a short­selling ser­vice. ADX chief ex­ec­u­tive Ab­dul­lah Al-Blooshi told Reuters the ex­change was act­ing af­ter the United Arab Emi­rates mar­ket reg­u­la­tor, the Se­cu­ri­ties and Com­modi­ties Au­thor­ity, ap­proved rules on short-sell­ing.

Dubai Financial Mar­ket, the UAE’s other big ex­change, did not re­spond to an emailed re­quest to com­ment on whether it too might even­tu­ally launch short-sell­ing. Blooshi said the ADX aimed ‘to di­ver­sify in­vest­ment in­stru­ments in or­der to in­crease the level of liq­uid­ity to match global mar­kets. This will en­able us to at­tract for­eign in­vestors ac­cus­tomed to these in­stru­ments’.

ADX’s short-sell­ing ser­vice will be open to in­vestors with mar­gin trad­ing ac­counts, in­vest­ment funds, in­sti­tu­tional in­vestors, cus­to­dian clients and mar­ket mak­ers, said Blooshi, not­ing that the ‘door will be open’ to other in­vestors if they ob­tain ap­proval from the ex­change. In a state­ment, the ADX de­scribed sev­eral rules to re­duce risks sur­round­ing short-sell­ing. For ex­am­ple, the price of a stock sold short must be higher than the last deal price in­volv­ing the stock, while bro­kers’ clients will have to pro­vide guar­an­tees when sell­ing short. — Reuters

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