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Mon 18 Dec 2017 09:10 AM

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DFM to boost liquidity with launch of regulated short selling

DFM is currently processing license requests from seven brokerage firms

DFM to boost liquidity with launch of regulated short selling

Dubai Financial Market (DFM) has launched regulated short selling to further enhance market liquidity, according to Essa Kazim, chairman of Dubai Financial Market.

Short-selling allows investors to sell stocks that they don’t own in order to make a profit if the share price declines before the trade has cleared and settled. Investors can then buy back the stock at a lower price.

Widely banned in the Gulf up until this year, foreign investors were able to get around the ban in some markets by using offshore swaps.

Abu Dhabi had announced in October that it was introducing technical short-selling, limiting short-sold positions to settle within two working days. In Saudi Arabia, the Tadawul said it would extend the period for settling trades and introduce short-selling on April 23.

Kazim said the new DFM service is “carefully designed to give investors the opportunity to short securities while safeguarding the market from any unsolicited repercussions.”

He added: “Over the past few months, we have implemented wide-ranging enhancements for the systems and regulations to ensure full readiness for such significant development in accordance with international best practices and in coordination with market participants.”

The DFM is currently processing license requests from seven brokerage firms who, once approved will provide the new service to clients.

Short-selling will be available on a selected list of eligible DFM-listed securities that will be reviewed every six months in accordance with international recommendations. The list will also include all exchange-traded funds (ETF) once listed on the market, as well as various listed securities that are included in UAE indices of international index compilers, provided that the security is maintaining its position on the index.

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