Abu Dhabi Exchange to Introduce Short-selling in Q-1 2017

Abu Dhabi Exchange to Introduce Short-selling in Q-1 2017

Abu Dhabi Exchange to Introduce Short-selling in Q-1 2017

The move is hoped to help ADX boost liquidity and attract more foreign investors

Abu Dhabi’s stock market plans to introduce covered short-selling in Q-1 of Y 2017, its CEO said on Monday, as it seeks to boost liquidity and attract more foreign investors.

In covered short-selling, investors borrow shares and sell them in the expectation of repurchasing them later at a lower price.

Regulators in the Gulf have until now shied away from allowing the practice because of concern that it could destabilise markets, though some countries including Saudi Arabia and Qatar have said they plan to introduce it.

The Abu Dhabi Securities Exchange (ADX) said Monday it had held meetings with brokerages in Abu Dhabi and Dubai ahead of the launch of a short-selling service.

ADX CEO Abdullah al-Blooshi told Reuters the exchange was acting after the UAE market regulator, the Securities and Commodities Authority, approved rules on short-selling.

Dubai Financial Market, the UAE’s other big exchange, did not respond to an e-Mailed request to comment on whether it too might eventually launch short-selling.

 Mr. Blooshi said the ADX aimed “to diversify investment instruments in order to increase the level of liquidity to match global markets. This will enable us to attract foreign investors accustomed to these instruments”.

ADX’s short-selling service will be open to investors with margin trading accounts, investment funds, institutional investors, custodian clients and market makers, he said, noting that the “door will be open” to other investors if they obtain approval from the exchange.

In a statement, the ADX described several rules to reduce risks surrounding short-selling.

For example: the price of a stock sold short must be higher than the last deal price involving the stock, while brokers’ clients will have to provide guarantees when selling short.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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