Abu Dhabi bourse launches technical short-selling service

Abu Dhabi Securities Exchange (ADX) on Tuesday launched its technical short-selling service, as part of its strategy to increase liquidity levels as well as diversify investment and hedging instruments in order to attract more foreign investors.

ADX, which announced its plan to introduce technical short-selling last year, is the first equity market in the Gulf region to offer this service.

The exchange said it has adopted integrated regulatory network and structure to protect against fraudulent practice, and ensure a fair and secure trading environment.

“Abu Dhabi Securities Exchange is keen to define a set of clear laws, rights and obligations governing transactions under the technical short-sale service for brokers and investors alike,” Rashed Al Blooshi, chief executive of ADX, said in a statement.

“We are committed to transparency, with an absolute commitment to publish all information related to the service on a daily basis via our website,” he added.

Technical short-selling allows investors to sell stocks that they do not own, but can afford within the applicable settlement period (T+2), in order to achieve profit buying the stock back if the value goes down.

The ADX said it has implemented measures to regulate the short-sell service including, trade suspensions for a 5 percent drop in the reference price of a given stock or if short-sold securities reach 10 percent of the total capital issued.

In addition to the existing approval frameworks for lending and borrowing agent, the short-sell framework also obliges a broker to disclose short dated trades.