* Qatar central bank recently sent circular to banks
* Circular could restrict what services offered
* Low trading volumes make restricted service unappealing
By Regan Doherty and Nadia Saleem
DOHA, March 20 (Reuters) - Several Qatari banks may delay or even halt plans to offer brokerage services following a recent directive from Qatar's central bank about the activities they would be allowed to carry out, sources said on Tuesday.
The Gulf state's central bank sent a circular earlier this year that the sources said could restrict banks from offering full-service brokerage operations, limiting them to buying and selling shares but not managing portfolios or advising clients.
But because trading volumes in Qatar have recently shrunk, banks are reconsidering whether to continue with plans to launching brokerages when small-time trading would barely cover costs, sources in Doha said.
"The banks went through a lengthy application process and with the low volumes in the market right now, they said they will hold their plans but not stop the ball completely," one Doha-based wealth manager said. "Personally, I don't think they will go through with it. There are too many players in the market."
Another Doha-based source close to the matter said: "Some firms are now wondering how they are ever going to make money on pure brokerage activities alone."
Some said it was not clear what the central bank circular had proscribed.
"The circular was interpreted to mean brokerages could not execute foreign trades, but it's not clear that that's the case," a Doha-based source close to the matter said.
The central bank did not immediately respond to a request for clarification.
Doha Bank, Commercial Bank of Qatar (CBQ) and Al Khaliji Bank all plan to open brokerages in Doha.
Doha Bank said the launch of the bank's planned brokerage had been postponed.
"We will set up an asset management division first, and then do the brokerage. The only thing that has changed is the sequence: asset management will be first, then we will launch the brokerage," Doha Bank Chief Executive Raghavan Seetharaman told Reuters.
Al Khaliji Bank will go ahead with its planned brokerage, a senior executive said, but declined to give a timeframe for the launch.
"We are going ahead with it. We believe that we can still do sensible business," Al Khaliji Group Chief Financial Officer Christiaan de Beer told Reuters.
"We don't have a specific timeline, because the approval process is subject to factors outside our control ... We will comply with the central bank circular."
It would not be the first time Qatar central bank orders had created a degree of confusion. Last year it ordered conventional banks to stop offering Islamic banking services by year-end, in a move criticized at the time for a lack of clarity.
Separately the Qatar Financial Markets Authority (QFMA) has sent a letter to all bank-owned brokerages in Qatar stating that by September they must have completely independent office premises from their bank affiliates, as part of their attempt to ensure the brokerages are truly independent of the banks, the Doha-based source close to the matter said. (Editing by David Holmes)