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by Ali Nehme
Publicis Media Middle East


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Abu Dhabi bourse to introduce short-selling in first quarter 2017 -CEO

December 27, 2016 11:21 am

Investors speak in front of a screen displaying stock information at the Abu Dhabi Securities Exchange, United Arab Emirates June 25, 2014. REUTERS/Stringer/File Photo

Abu Dhabi’s stock market plans to introduce covered short-selling in the first quarter of 2017, its chief executive said on Monday, 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 on Monday it had held meetings with brokerages in Abu Dhabi and Dubai ahead of the launch of a short-selling 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.

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Reuters
By Reuters
A division of Thomson Reuters, Reuters is an international news agency headquartered in London, England, and provides up-to-the-minute news and views on global and regional events.

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