Qatar’s stock exchange and its financial regulator, the Qatar Financial Markets Authority, as well as the local securities depository, are moving forward with a plan to offer short selling and securities lending locally. This is still subject to final and formal approval from the QFMA, but would be a big step forwards in the continued evolution of sophisticated regional financial markets.
Local authorities said that short selling would initially only be available for market makers, liquidity providers, and qualified investors. The regulator may be in a position to also approve specific individual cases. Securities lending transactions will be executed through the Edaa trading system, the local depositary. Custodians will need to be licensed by the QFMA.
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The move is being regarded as an essential component for the development of a local Qatari derivatives market. Regionally, Saudi Arabia broke new ground when HSBC announced it had completed the first ever securities lending transaction in Saudi. In this case, HSBC acted as the custodian and the agent lender on the deal, which included borrowing equites from a large regional asset owner, to lend to institutional investors.
Under the terms of the covered short selling rules, transactions can only be executed if the price is higher than the last traded price of the same security. Brokers will be responsible for ensuring that covered short selling is entered into the trading system at a price that is at least one point higher than the last traded price for that security.
Local commentators said that the new rules were designed to help to attract institutional investors into the local market. Like other countries in the region, Qatar is keen to continue to foster the development and relative competitiveness of its financial markets.
Qatar’s local market has slumped in terms of total capitalisation in the last 12 months. According to CEIC data, it stood at QAR 748m in August 2022; it was trading at around 642m at the end of July, following a rally in value off lows reached earlier in the year.
Saudi Arabia has allowed short selling and securities lending since 2017.