Marketing & Corporate Communication Department
ADX BEGINS AN AWARENESS CAMPAIGN FOR INVESTORS AND BROKERS
ADX INTRODUCES THE TECHNICAL SHORT SELLING SERVICE BY THE BEGINNING OF 2017
TECHNICAL SHORT SELLING SERVICE IS PART OF CONTINUOUS EFFORTS TO DIVERSIFY INVESTMENT INSTRUMENTS IN THE MARKET – AL BLOOSHI
Abu Dhabi – 26th December 2016:
ABU DHABI – Abu Dhabi Securities Exchange (ADX) has started the technical short selling service by conducting meetings with brokerage companies in Abu Dhabi and Dubai, in order to begin the official introduction early next year.
“This service is part of continuing efforts to modernize, enlarge and upgrade the market. It also aims at diversifying 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,” said Abdullah Al-Blooshi, ADX chief executive officer.
Technical short selling allows the investors to sell stocks that they don’t own, yet theyare committed to afford during the settlement period. The aim is to gain profits from the price difference if the stock value goes down.
According to Al-Blooshi, brokerage companies will benefit from this service on behalf of their customers, the market maker, as well as any side that ADX finds fit for this service. It was empowered in a gradual application system, hence the market discloses the stocks listed that will be allowed for short selling.
“Since ADX became a digital market, it adopted a policy of guarantying these disclosures for every concerned side, with the ability to achieve continuous evaluation of stocks allowed for short selling, which will be done every six months. And in case the situation has changed, the market will request the short accounts to hand over sold stocks in settlement days,” added Al-Blooshi.
According to Al-Blooshi, ADX pays attention to surveillance and transparency procedures, which enabled the market to join emerging markets list.
“The accounts allowed for short selling are only margin trading accounts and investors who obtained ADX acceptance to trade technical sort 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,” added Al-Blooshi.
Given the nature of this instrument, ADX stipulates that the price of sold stock must be higher than the price of last deal price – or one unit higher. And in case the price slumps %5 during the same trading session, the automatic short selling mechanism will be ceased during the same day as well as during the following trading day.
“This efficient system guarantees instant disclosure for all stocks open for short selling, the daily volume, the dates of trading as well as the automatic time of these sales,” said ADX chief executive officer.
Meanwhile, Abdullah al-Nuaimi, head of market operations & surveillance department, said that licensed companies must guarantee strict accounting commitments with investors and clients, in accordance with ADX conditions.
“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% 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,” added Al-Nuaimi.
“Short selling in an advanced step, not only as a hedging instrument, but also as a way increase the level of liquidity. The stock lender is usually a long-term investor, and the short selling will lead to further deals for these borrowed stocks,” added the head of market operations & surveillance department.
About Abu Dhabi Securities Market (ADX)
Abu Dhabi Securities Exchange (ADX) was established on November 15 of the year 2000 by Local Law No. (3) Of 2000, the provisions of which vest the market with a legal entity of autonomous status, independent finance and management. The Law also provides ADX with the necessary supervisory and executive powers to exercise its functions.
These functions are:
- Provide opportunities to invest savings and funds in securities in order to benefit national economy.
- Ensure the soundness and accuracy of transactions and to ensure the interaction between demand and supply in order to determine prices.
- Protect investors through establishing fair and proper dealing principles between various investors.
- Impose stringent controls over securities transactions to ensure sound and conduct procedure.
- Develop investment awareness by conduction studies and issuing recommendations in order to ensure that savings are invested in productive sectors.
- Ensure financial and economic stability and develop trading methods in order to ensure liquidity and stability of prices of Securities listed on the market.
ADX is a market for trading securities; including shares issued by public joint stock companies, bonds issued by governments or corporations, exchange traded funds, and any other financial instruments approved by the UAE Securities and Commodities Authority (SCA).
At the end of 2015, ADX had 71 listed securities with a market capitalization of AED 447 billion (USD 122 billion). Those securities include 66 public joint stock companies, 2 private joint stock companies, 1 Exchange Traded Fund (ETF), 1 Abu Dhabi Government
Fund, and 1 convertible bond. ADX listed companies are allocated in nine sectors; Banking, Real Estate, Consumer Staples, Investment and Financial Services, Industrial, Telecommunication, Services, Energy, and the Insurance sector.
ADX allows for investors to trade through any of the registered brokerages at the exchange through advanced electronic automated services. ADX has also signed a number of agreements with major financial institutions to provide for custody services, including renowned international corporations; namely the National Bank of Abu Dhabi (NBAD), HSBC, Standard Chartered, Deutsche Bank and Citi Banking Group.
ADX goals are in line with Abu Dhabi Government Economic Vision 2030. The 2030 economic plan plays a vital role in ADX strategy since it places the financial market in the context of economic and social development. The development would be through diverting savings towards investment in the various economic sectors and developing the financial infrastructure of Abu Dhabi to transform the emirate into one of the leading finance and services center in the region.
In 2014, ADX was upgraded to ‘Emerging Market’ status by both MSCI index (Morgan Stanley Capital International) and S&P Dow Jones, thus greatly increasing the likelihood of inward global investment flows. ADX was already classified as an Emerging Market by FTSE in 2009 and in 2011 by S&P and Russell Investments.
In 2015, ADX won the Most Innovative Exchange GCC 2015 Award. The award, given by Capital Finance International, celebrates achievement, innovation from an international perspective, recognizing organizations with innovative technology products backed by strong management, excellent service standards and sound business models. Capital Finance International is a leading print journal and online resource reporting on business, economics, and finance.
For more information, please contact:
Mr. Adel Maktoom Al Dhaheri
Manager of Corporate Communication & Digital Marketing
Marketing & Corporate Communication Department
Abu Dhabi Securities Exchange
Tel: 00971 (2) 6128716
Mobile: 00971 (50) 6221266