UAE stock market regulator to licence up to three new brokerages this year

There are 49 licensed brokerages, and the SCA may approve two or three new ones this year. Christopher Pike / The National

The stock market regulator expects to licence up to three more brokerages and enforce a new brokerage law this year, a senior regulatory official said.

There are 49 licensed brokerages, and the authority may approve two or three new ones this year, said Maryam Buti Al Suwaidi, the deputy chief executive for licensing, supervision and enforcement at the Securities and Commodities Authority (SCA).

The capital required to operate a brokerage house had been increased to Dh30 million from Dh20m at the start of the financial crisis to encourage consolidation in the sector.

The SCA has given brokerages breathing space before implementing the new regulations, which will categorise brokerages into two classifications and reduce their capital requirements. The new rules were approved last July in a bid to open up the industry to competition.

“We gave brokerages a transitional period to comply with the rules,” said Ms Al Suwaidi. “We will have smaller and bigger firms. [With the new regulations] they can counter their risks as well as lower the regulatory burden on them. They will have less capital.”

Trading brokerages now require a paid-up capital of Dh3m, whereas trading and clearance brokerages will need Dh10m, the SCA said last year. The bank guarantee required for brokerages to trade on the bourses will be Dh1m, compared with Dh20m before.

The SCA is also keen to enforce corporate governance and a ban on short selling, which is illegal in the UAE, said Ms Al Suwaidi.

Short selling is the practice of selling borrowed shares with the hope of buying them back later at a lower price, returning them to the original owner and keeping the difference.

Brokers have said that foreign investment banks helped to exaggerate the fall in stock markets in the third quarter of last year by taking short positions on local stocks. Stocks have continued to fall this year, with Dubai's index down 9.7 per cent and the Abu Dhabi index down 5.5 per cent for the year to date.

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