Abu Dhabi Securities Exchange (ADX) launched a technical short-selling service (TSS) on Tuesday, which allows investors to sell stocks they don’t own in order to profit from a future drop in value.
ADX is the first market in the GCC region to offer new investment instrument aims to boost liquidity in the stock market, diversify investment instruments and attract foreign investors, they said.
The TSS service allows the investor to sell stocks that they don’t own or that they have borrowed, based on the belief that the security’s price will decline by the time the trade has cleared an settled within two working days. Investors can then buy back the stock at a lower price.
The exchange said that the measures were adopted to regulate the short sell service including, a trading suspension if a stock drops 5 percent, or if the short sold securities reach 10 percent of a company’s capital.
Rashed Al Blooshi, chief executive of ADX, said the new system and regulatory network would help protect the market against fraudulent practice, and ensure a fair and secure trading environment in liner with best international practices.
“Abu Dhabi Securities Exchange is keen to define a set of clear laws, rights and obligations governing transactions under the technical short sale service for brokers and investors alike," Al Blooshi said.
"We are committed to transparency, with an absolute commitment to publish all information related to the service on a daily basis via our website."
He added that it will give investors the confidence to invest their savings in the new service, knowing it sits within an advanced legal framework defined by trust, fairness and full disclosure.
The Dubai Financial Market said in January that they also plan to adopt the investment instrument.
ADX launched an awareness campaign on TSS services in Abu Dhabi, Fujairah, Sharjah, Ras Al Khaimah and Al Ain designed to educate investors, consumers, and brokers about the new service and its potential returns.
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