UAE-based Al Ramz Capital, an investment and brokerage company has carried out the first covered short-selling (CSS) using the stock lending and borrowing facility on the Abu Dhabi Securities Exchange.
The practice of selling borrowed shares in the expectation of purchasing them back later at a lower price is the short-selling. Stock lending and borrowing is a mechanism in which traders borrow shares they do not already own or lend shares they own but do not want to sell immediately. It enables investors to raise the return on long-term holdings by lending securities for an annualized fee to borrowers while maintaining all the rights to own the securities.
Mohammed Al Shorafa, chairman, ADX said, “The launch of the CSS service is part of the exchange’s strategy to support the diversification of investment tools and provide investors with a broader range of hedging mechanisms. By doing so, it will attract a new segment of specialized and experienced investors, driving both liquidity and trading volumes.”
To become more available to a wider range of investors, exchanges across the region are going through structural and regulatory reforms. They have rapidly increased product offers over the last few years to attract more foreign direct investment.
In 2017, the second-largest market capitalization exchange in the Arab world launched technical short-selling services as part of efforts to improve liquidity and draw more international investors.
Dhafer Sahmi Al-Ahbabi, chairman, Al Ramz said, “This is an important step forward in the development of regional capital markets. Stock lending and borrowing provide investors with the opportunity to enhance the return on long-term holdings while simultaneously providing other market participants hedging and shorting solutions.”
Recently, Abu Dhabi Securities Exchange (ADX) launched the Covered Short Selling (CSS) investment services to boost the exchange’s investment diversification strategy and provide investors with a wide range of hedging mechanisms.
Al Ramz Capital
Al Ramz Capital is a subsidiary of Al Ramz, a listed company in the Dubai Stock Market, offering a range of financial products and services, including asset management, corporate finance, market making, liquidity distribution, brokerage, IPO management and research.