QE to introduce margin trading, short selling

25/05/2014 09:37 AST

Qatar Exchange CEO Rashid Al Mansoori (fourth right) and other dignitaries at a meeting in London.

DOHA: The Qatari bourse is planning to introduce margin trading and covered short selling in the near future and so is busy with the regulator to evolve rules and regulations to govern the above transactions.

The idea is to increase investment opportunities on the market, diversify the market and help enhance liquidity. This was disclosed at a dinner meeting in London by the CEO of the bourse, Qatar Exchange (QE), Rashid Al Mansoori. Present at the meet held recently were sell side brokers and institutions in London who are responsible for international flow into the Qatari market.

According to a press statement issued by QE yesterday, Al Mansoori was in London heading a delegation from the stock market to meet with sell side representatives in London ahead of the Qatari bourse’s inclusion in the MSCI Emerging Market Index.

Buying on margin is borrowing money from a broker to purchase stocks and this allows one to buy more stocks than one is able to normally. Margin trading is allowed at almost all stock exchanges the world over. One needs to open a margin account (different from cash account) with a broker for that purpose.

Short selling is borrowing stocks and selling them in the hope that their prices would be down. Then buying the stocks when the prices are down and giving them back to the broker, thus making a profit. It is a highly risky transaction.

Al Mansoori said: “We believe we have made significant progress at a legislative and technical level, infrastructure and systems, disclosure and governance practices, awareness-raising and spreading the culture of investment; as well as the diversification of investment tools and services provided to investors.”

Al Mansoori recognised the role played by the sell side institutions in presenting an efficient and easy access to the Qatari market for the international investors. He welcomed the feedback provided by those present on how to further enhance the accessibility to the Qatari market.

Al Mansoori said the Exchange has implemented a number of measures to enhance the liquidity of the market. He said, “these measures include tick size changes, adjusting the trading hours, enhancing the number of brokerage firms, assisting in licensing a number of banks as custodians, introducing the concept of liquidity provision and securities lending and borrowing. Secondly, we have introduced DvP and DMA schemes for foreign brokers, the latter through a sponsoring local broker. Thirdly, the exchange has introduced a number of new investment tools such as bonds and treasury bills, as well as launching various new indices.”

Al Mansoori said: “These infrastructure changes are of course market-wide and therefore, benefits the international investor base too. Foreign investors generate 40 percent of the total turnover and the sell side brokers are responsible for facilitating this order traffic into the market by ensuring prompt execution and best services to the investors.”

Al Mansoori said the Exchange is keen to implement the world best practices in securities trading: “The liquidity aspect is our top priority given its importance to the domestic and international investor base. In this sense, the development of QE’s trading environment (now covering UTP, DvP and Scila) reflects best international practice providing investors with new investment opportunities backed by the existence of efficient and effective systems. QE is working on two live ETF projects. One of these will be an ETF based on government fixed income risk from an Asian borrower and the second product is likely to be an ETF based on a representative Qatar-country index. We hope to introduce these ETFs to the market in the next six months. In terms of AUM these transactions will be larger than anything else curre

The Peninsula