June 11, 2018 / 12:52 PM / 5 months ago

UAE central bank assumes role of settlement and clearing agent

ABU DHABI, June 11 (Reuters) - The Central Bank of the United Arab Emirates has assumed the role of settlement and clearing agent for market transactions, the head of the securities regulator said.

Previously, First Abu Dhabi Bank and Emirates NBD played that role for the Abu Dhabi Securities Market (ADX) and the Dubai Financial Market (DFM) respectively.

“It has started with ADX and will be followed by DFM,” Obaid al Zaabi, chief executive of Securities & Commodities Authority (SCA) said, adding the move was in line with the practices of developed markets.

Under the new system it would be easier for the central bank to control the flow of liquidity as well as monitor the markets, a senior equities analyst said.

“Earlier the banks used to earn a small fee for settlement and clearing but now they stand to lose that,” he said, declining to be named as he is not authorised to speak to media.

The UAE securities regulator is also urging brokerage firms to enlarge their scope of activities by providing varied financial services such as underwriting, advisory, funds management and others.

“They should invest more or go for mergers and acquisitions and offer services like investment banks,” al Zaabi said, adding it would be a step by step process.

The last quarter of 2018 is likely to see at least three big companies in the UAE launching a share sale, he said.

“They (companies) have frozen plans because of the market condition – low volume of trading, liquidity,” he said. (Reporting By Stanley Carvalho)

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