Bahrain to boost finance sector with short selling
25 March 2019 Manama
Image: Shutterstock
As part of the Central Bank of Bahrain’s (CBB) effort to develop the financial sector in the Kingdom of Bahrain, the CBB has issued new regulations in respect of short selling and giving securities on loan.
The CBB Law states that: “The Central Bank shall specify the types of securities, which may be traded by loan and short sale, the terms, and procedures of such transactions and the rights and obligations of all concerned parties.”
The new regulation introduces short selling and giving securities on loan into the Kingdom’s capital markets ecosystem.
It was noted that the resolution encompasses the controls and procedures pertaining to lending, borrowing, and short selling of eligible securities, the obligations of the related parties.
Additionally, it makes reference to guidelines and instructions necessary to implement the requirements of this resolution.
Meanwhile, in order to ensure effective implementation, the CBB advised the licensed exchange and the licensed clearing house to issue their own rules and guidelines.
They should also establish controls and procedures related to dealing in securities through lending and borrowing and short selling according to the provisions stipulated in the resolution, CBB explained.
Abeer Al Sheikh Ebrahim Al Saad, director of the capital markets supervision directorate at the CBB, said: “CBB continuously aims to remain abreast of market changes, diversify its product offerings and proactively adopt initiatives and projects that cater to market participants within the capital markets in the Kingdom.”
“The objective of this Resolution is to improve the efficiency of the capital markets in the Kingdom by promoting new investment and trading strategies through diversification of investment instruments which shall result in better price discovery, enhanced liquidity and attracting new sophisticated investors.”
Sheikh Khalifa bin Ebrahim Al-Khalifa, CEO of Bahrain Bourse and vice chairman and managing director of Bahrain Clear, stated: “The issuance of this resolution is a key milestone in the development of the capital markets, which is expected to enhance market liquidity.”
“Furthermore, the roll-out of this market feature within the capital market is expected to attract significant international investment interest as well as form a stepping stone towards the achievements of an emerging market status.”
The CBB Law states that: “The Central Bank shall specify the types of securities, which may be traded by loan and short sale, the terms, and procedures of such transactions and the rights and obligations of all concerned parties.”
The new regulation introduces short selling and giving securities on loan into the Kingdom’s capital markets ecosystem.
It was noted that the resolution encompasses the controls and procedures pertaining to lending, borrowing, and short selling of eligible securities, the obligations of the related parties.
Additionally, it makes reference to guidelines and instructions necessary to implement the requirements of this resolution.
Meanwhile, in order to ensure effective implementation, the CBB advised the licensed exchange and the licensed clearing house to issue their own rules and guidelines.
They should also establish controls and procedures related to dealing in securities through lending and borrowing and short selling according to the provisions stipulated in the resolution, CBB explained.
Abeer Al Sheikh Ebrahim Al Saad, director of the capital markets supervision directorate at the CBB, said: “CBB continuously aims to remain abreast of market changes, diversify its product offerings and proactively adopt initiatives and projects that cater to market participants within the capital markets in the Kingdom.”
“The objective of this Resolution is to improve the efficiency of the capital markets in the Kingdom by promoting new investment and trading strategies through diversification of investment instruments which shall result in better price discovery, enhanced liquidity and attracting new sophisticated investors.”
Sheikh Khalifa bin Ebrahim Al-Khalifa, CEO of Bahrain Bourse and vice chairman and managing director of Bahrain Clear, stated: “The issuance of this resolution is a key milestone in the development of the capital markets, which is expected to enhance market liquidity.”
“Furthermore, the roll-out of this market feature within the capital market is expected to attract significant international investment interest as well as form a stepping stone towards the achievements of an emerging market status.”
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