GCC financial markets integration, merger of brokerage firms under way

02/10/2011 00:00 AST

Yahya bin Said Abdullah al Jabri, Executive President, Capital Market Authority (CMA) says, “A GCC-wide integration of the financial markets is in the process”. In response to a query about its significance, Al Jabri said, “Once integrated there are ample of benefits in terms of wider scope for investors both domestic and foreign, increased turnover, more liquidity, expansion of markets to the other countries markets, possible to introduce new and sophisticated financial instruments in to the market”.

About the new trends and developments taking place in the market at this moment, Al Jabri said, “It is believed that the market is in its recovery stage. In the next couple of years the markets across the globe are expected to show positive trends. The global crisis and markets sentiments are the possible reasons for the recent down trend in the markets.

“This has been observed across the GCC and the other parts of the world. We are not exception but the impact is negligible. At CMA we are seriously considering this issue and the possible steps like encouraging the merging of the brokerage companies, addressing the issue of reducing the trade commissions and observing and insisting the corporate to follow strict corporate governance code.

“Special incentives have been offered for the broking companies to merge. Added to it we are encouraging the Islamic banking products too”. One of the fundamental and most important objectives of the CMA is continuous development of the capital markets in the country and having in place legal infrastructure at international standards. To achieve this “we have placed effective and transparent regulations. Besides, there is a need for the new asset class in the market with tools like margin trading mechanisms. We are permitted market to introduce margin trading with new rules considering the effective market risk management and simultaneously encouraging the Sukuk market. Further, to increase the float in the market and to enhance the liquidity, CMA is also suggesting the government for disinvestment”.

There is a need for new regulations for the Sukuk market. The CMA is in the process of coming with new rules and regulations for this market taking all issues in to consideration and more specifically risk factors to make the issuance risk free and attractive to the investment community. Al Jabri says, the introduction of new electronic trading system at MSM in 2006 has yielded good results over the years.

One of the main benefits of this system is seamless trading, clearing and settlement mechanism, besides investors’ protection, said Al Jabri. Further, the system supports to the increased number of transactions (in future) without any difficulty and also meets the international standards of effective risk management. The system is capable to meet other requirements of integration of GCC markets in future, he added.

Financial markets are becoming increasingly global, giving investors a wide choice. Technology and integration of the markets enable investors to trade on any market, global or regional, subject to local regulations. “Presently the markets are global in nature. MSM already established electronic trading link with a couple of GCC countries through the brokers for trading in securities and is further planning to integrate with other countries in GCC and other countries in future”, al Jabri added.

Oman Daily Observer