The Regulated Short Selling enables investors to short securities listed on DFM through selling borrowed shares with a commitment to return to the lender based on the mutually signed agreement. To implement RSS, the brokerage firm has to ensure that the borrowed securities are located on the client’s account prior to placing a short selling order, with exception of 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.
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 successfully 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 in order to ensure the full readiness of DFM’s systems and regulation.
The DFM also implemented a widespread awareness campaign including organizing series of educational workshops to raise awareness amongst market participants. Brokerage firms have showed strong interest during these sessions in a clear evidence of their enthusiasm towards the new service.
HE Essa Kazim, Chairman of Dubai Financial Market 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 in coordination with market participants. We have carefully designed this new service to give investors the opportunity to short listed securities while safeguarding the market from any unsolicited repercussions on the market.”
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 ETFs once listed on the market as well as various listed securities that are included in UAE indices of international index compilers provided as long as the security is maintaining its position on the index.