Abu Dhabi Exchange to launch shorting platform
03 January 2017 Abu Dhabi
Image: Shutterstock
The Abu Dhabi Securities Exchange (ADX) is set to introduce a short selling service early in 2017.
The exchange is engaging with brokerage companies in Abu Dhabi and Dubai, to launch the service with the aim of making the United Arab Emirates market more attractive to foreign investors and boost overall liquidity.
As part of its technical short selling regulations ADX will require that the price of sold stock must be higher than the price of last deal price, or one unit higher. If the price slumps 5 percent during the same trading session, the automatic short selling mechanism will be ceased for that trading session as well as during the following trading day.
Abdullah Al-Blooshi, ADX CEO, said: “The accounts allowed for short selling are only margin trading accounts and investors who obtained ADX acceptance to trade technical short selling, in addition to investment funds, institutional investors, custodian clients, and market makers. Bearing in mind that the door will be open for others who we ensure his/her financial and investing situation.”
Al-Nuaimi, head of the market operations and surveillance department, added: “Brokerage companies must be committed that the technical short selling is a (minus) purchase in order to be fully disclosed. Also, in the brokers’ books, a 20 percent of the deal will be added as a guarantee."
"By the end of the day the brokers as well as the custodian will evaluate the stocks that were short-sold in accordance to its market value, and against the guarantee presented by the client. If the price is not equal to the market value, the clients will be informed to increase their guarantee. Otherwise the broker has the right to purchase the stocks.”
The exchange is engaging with brokerage companies in Abu Dhabi and Dubai, to launch the service with the aim of making the United Arab Emirates market more attractive to foreign investors and boost overall liquidity.
As part of its technical short selling regulations ADX will require that the price of sold stock must be higher than the price of last deal price, or one unit higher. If the price slumps 5 percent during the same trading session, the automatic short selling mechanism will be ceased for that trading session as well as during the following trading day.
Abdullah Al-Blooshi, ADX CEO, said: “The accounts allowed for short selling are only margin trading accounts and investors who obtained ADX acceptance to trade technical short selling, in addition to investment funds, institutional investors, custodian clients, and market makers. Bearing in mind that the door will be open for others who we ensure his/her financial and investing situation.”
Al-Nuaimi, head of the market operations and surveillance department, added: “Brokerage companies must be committed that the technical short selling is a (minus) purchase in order to be fully disclosed. Also, in the brokers’ books, a 20 percent of the deal will be added as a guarantee."
"By the end of the day the brokers as well as the custodian will evaluate the stocks that were short-sold in accordance to its market value, and against the guarantee presented by the client. If the price is not equal to the market value, the clients will be informed to increase their guarantee. Otherwise the broker has the right to purchase the stocks.”
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