DFM launches ‘Regulated Short Selling’ service

DUBAI, 17th December, 2017 (WAM) — The Dubai Financial Market, DFM, today launched the Regulated Short Selling, RSS, service following the completion of all regulatory, technical and procedural preparations.

The service is part of DFM’s efforts to provide market participants with new tools to further strengthen their trading activities, better utilise their resources, and further enhance market liquidity.

The RSS service enables investors to short securities listed on DFM through selling borrowed shares with a commitment to return it to the lender based on the mutually signed agreement.

To implement RSS, a brokerage firm has to ensure that the borrowed securities are located on the client’s account prior to placing a short selling order, except for DvP clients, as a lending confirmation is sufficient to proceed with the order. The RSS complements the ‘securities lending and borrowing activity’ whereby approved lenders can lend securities to approved borrowers for settlement of RSS trades.

Essa Kazim, Chairman of DFM, said, “As part of DFM’s strategy to diversify its products and services, we are delighted to announce the completion of our preparations to introduce this significant tool to our market participants in a step aimed at increasing their capabilities and helping them to strengthen their trading activity and further enhance trading liquidity.

“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 coordination with market participants. We have carefully designed this new service to give investors the opportunity to shortlisted securities while safeguarding the market from any unsolicited repercussions on the market,” he added.

The exchange is currently processing license requests from seven brokerage firms, and they will provide this new service to their customers once receiving the approval and completing the technical testing.

The DFM has earlier secured the approval of the Securities and Commodities Authority, SCA, to introduce the regulations of Short Selling. The exchange has completed extensive preparation stage over the past few months that included the consultations with market participants on the operating model and the necessary technical enhancements to ensure the full readiness of DFM’s systems and regulation.

The DFM also implemented a widespread awareness campaign including organising series of educational workshops to raise awareness amongst market participants. Brokerage firms have shown strong interest during these sessions in a clear evidence of their enthusiasm towards the new service.

The RSS 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 Fund, ETF, once listed on the market as well as various listed securities included in UAE indices of international index compilers provided, as long as the security is maintaining its position on the index.

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