Dubai DFM Accredits Two Firms as First Market Makers And Liquidity Providers

SCA’s regulations stipulates that the ownership of a liquidity provider cannot exceed 5% of the listed company’s shares.

Dubai Financial Market (DFM), the Arab Gulf’s only listed stock exchange, reported today that it has accredited two new firms to provide liquidity and to act as market makers for its listed companies. The DFM has registered SHUAA Capital International and Al Ramz Capital in line with the guidelines issued by the country’s main financial watchdog, the Securities and Commodities Authority (SCA), pertaining liquidity provision.

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As market makers on the DFM, SHUAA and Al Ramz will offer simultaneous bid and offer prices in selected securities listed on the exchange as part of its market making services. The agreement intends to further strengthen liquidity, pricing, and market depth offered to the bourse’s investors.

The new service enables issuers to mandate a licensed company to provide LP services on a specific share. For the sell side firms, opportunities for market making will increase as the exchange adds more securities including further equity listings.

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The SCA’s regulations pertaining to Liquidity Provision stipulates that the ownership of a liquidity provider cannot exceed 5% of the listed company’s shares and the issuers has the right to assign multiple liquidity providers.

More companies to follow next

SHUAA was the first market maker on NASDAQ Dubai, which offers stock futures, and currently provides this service to three stocks: DP World, Emirates REIT and OC. The Company has a property trading platform, SunGard’s Front Arena, which enables it to provide market making activities among other capital markets trading services and solutions.

A subsidiary of Dubai-listed group Al Ramz Corporation Investment & Development, Al Ramz Capital will also act as a market maker by committing to provide liquidity in the stocks listed on the DFM. Al Ramz’s COO Abdel Hadi Al Sa’di noted that market making in Dubai represents a major milestone toward evolving into a developed market; in addition of being an essential function for capital markets to become efficient, more active, and more compatible with institutional requirements.

Commenting on this, Hassan Al Serkal, Head of Operations Division of DFM said: “This service provides issuers with a new tool to enhance liquidity of shares and achieve balance between buy and sell through mutual agreements with one or more Liquidity Provider. In fact, many companies are looking to provide the service, today we are delighted to welcome the first two companies, SHUAA Capital and Al Ramz Capital, which have been licensed to provide the service. There are more companies to follow during the coming period, which will play an integral role in realizing the benefits of this service for listed companies, investors and brokerage firms alike.”

Jassim Alseddiqi, Chairman of SHUAA Capital, added: “The shares of a significant number of fundamentally strong public companies often experience low trading volumes and an illiquidity discount. As a Market Maker, SHUAA Capital will help to attract more liquidity for these firms and give them more visibility.”

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