Dubai DFM to Introduce Central Counterparty Clearing in 2019

Dubai Financial Market (DFM), the Gulf’s only listed Stock Exchange Stock Exchange A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments. By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividendsStock exchanges have developed into a permanent fixture in the fin A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments. By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividendsStock exchanges have developed into a permanent fixture in the fin Read this Term, today decided to introduce central counterparty (CCP) clearing for trades in equities. The service will be provided by a specialized clearing entity, which will also create a settlement default fund consistent with market best practice.

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DFM currently offers a CCP service for clearing derivatives trading on its subsidiary Nasdaq Dubai. The bourse will begin consultations after two months, whilst planning to launch the new service in early 2019.

As a central counterparty in the equities market, DFM’s CCP entity, which will be part of a new wholly owned post-trade subsidiary, will take on the role of legal counterparty for both the original purchaser and the original seller from the time an order is matched on the exchange.

The introduction of a central counterparty reduces the risk exposure between participants in the central securities settlement process, whilst increasing confidence in the local market infrastructure. The DFM said that while market participants are currently required to maintain 100% collateral value for purchase trades, a central counterparty structure will reduce transaction costs for brokers. This is due to the number of settlement transactions carried out being reduced by means of transaction netting - in other words, only net positions are submitted for settlement.

Essa Kazim, Chairman of DFM, commented: “Financial markets globally recognize the need for a CCP to better manage risks associated with clearing and settlement especially more so for DFM being a listed entity. Accordingly, we are delighted to announce this significant market enhancement as part of DFM growth strategy, in order to well- position the market for sustained growth, as the introduction of a CCP reduces risk, and improves Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term.”

“With the support of the new CCP regulations, DFM is ready to embark on the next phase of improving its legal and operational market infrastructure to ensure that DFM remains at the forefront of the regional exchanges and further strengthened Dubai’s leading position as international capital markets hub,” he added.