Confusion over NBAD duties as sole market maker for Abu Dhabi

National Bank of Abu Dhabi’s role as the sole market maker for the Abu Dhabi Securities Exchange has been thrown into confusion, amid conflicting reports as to whether it has ceased offering services after less than a year.

The bank, which began offering market-making services for four Abu Dhabi listed stocks from February 2015, was reported by Reuters to have ceased offering the services in late 2015, according to sources with knowledge of the matter.

But ADX’s chief executive, Rashed Al Baloushi, insisted on Tuesday that the relationship with NBAD as exclusive market maker for the exchange was still in place.

“We haven’t received any official notification from NBAD regarding this news,” Mr Al Bal­oushi told The National on Tuesday morning, referring to the Reuters story.

“As far as we’re concerned, it’s business as usual, they have not stopped offering market making services.”

Speaking at the 10th GCC regulators forum in Abu Dhabi on Monday, NBAD’s chief executive, Alex Thursby, declined to comment on the market-making business, but appeared to downplay the importance of the bank’s equities division.

“We’re focusing on debt capital markets more than equities, because we don’t think it’s a natural place to play for us,” Mr Thursby said.

“We’re less of an equity house and more of a debt house. We can’t be all things to all men.”

Reuters reported that NBAD had scrapped the programme, which had not been profitable, after the departure of its head of equity market making, Galen Moore, in November.

An NBAD spokeswoman did not respond to requests for comment.

The bank was licensed by the ADX to offer market making services in April 2014, but only started offering the services in February last year. It was hoped that the licensing of market-making institutions would increase liquidity and would fac­il­itate greater participation of foreign financial institutions in the market, following the UAE’s inclusion in the MSCI Emerging Markets Index in May 2014.

Aldar Properties, Waha Capital, FGB and ADCB were the first stocks included in the programme, with Etisalat added in October 2015.

However, the increase in liquid­ity failed to materialise, as a fall in oil prices sapped investor appetite for stocks across the Middle East and other emerging markets.

Traded share volumes on the ADX and Dubai Financial Market dropped by 55 per cent and 43.5 per cent in 2015 compared with the previous year, putting severe pressure on local brokerages.

Of the four market-maker stocks in Abu Dhabi, FGB fared best, with volumes declining by 10.4 per cent in 2015. Aldar Properties, meanwhile, had its volumes plummet 64.7 per cent in comparison with 2014. “You can understand NBAD’s decision to stop market-making, if that is what they’ve done,” said Muhammad Shabbir, the head of equities at Rasmala Investment Bank in Dubai.

“It’s a difficult workflow if you’re taking a position as a market maker when the direction of the market is only one way and the market is very illiquid.”

Mr Al Baloushi said in October that the impact of market making services as “not as positive as we were expecting”, and that the exchange was in discussions with two other institutions for the services. He confirmed on Tuesday that talks were continuing with institutions, again declining to name them.

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John Everington

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