DFM plans to start short-selling of stocks, seen boosting volumes

04/01/2017 08:37 AST

The Dubai Financial Market (DFM) said on Tuesday it plans to allow traders to start short selling of select stocks in coming months, a move that analysts say would boost volumes further.

Short selling is the practice of selling securities that are not owned but usually borrowed, and the investor makes money from a drop in prices.

“The DFM has completed its soft consultation on its operational model and is completing technical enhancements to identify regulated short selling (RSS) trades ...,” the bourse said in a statement sent to Gulf News.

The bourse said it will start short selling “in the coming months subject to regulatory approvals of its rules.”

The statement comes after the Abu Dhabi Securities Exchange announced plans to introduce short selling in early 2017. Other regional bourses like the Saudi Arabia’s Tadawul exchange and the Qatar exchange also plan to launch the product soon.

Boost

Market participants have been actively trading in futures contracts in selected securities launched by Nasdaq Dubai, a move that has further enhanced the availability of instruments for hedging purpose, and analysts say short selling will provide more avenues for traders. “It will help the ability of traders to sell shorts, and thus provides liquidity in the market, and various options for traders to trade,” Saleem Khokhar, head of equities at NBAD’s asset management group told Gulf News, adding “it would a step in the right direction. It would be useful going forward.”

This will help traders to use long-short hedge fund type strategies among others, he added. The DFM, which trades in more than 30 stocks, has been witnessing a drawdown in traded volumes in recent months due to falling prices of oil, which drives investor sentiment locally and in the region.

The number of transactions executed in 2016 fell 14.4 per cent to reach 1.3 million compared to 1.5 million deals carried out during the previous year, data from thes DFM showed.

Gulfnews