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QSE mulls 'remote membership' for foreign brokerages to boost liquidity.

The QSE's plan of giving remote membership for foreign stock brokerages is likely to be rolled out in the third phase of its development, according to sources.

By Santhosh V Perumal/Business Reporter

Qatar may see the advent of foreign stock brokerages with its local bourse contemplating 'remote membership', it is learnt.

The move by the Qatar Stock Exchange (QSE) is part of the broader strategies to help enhance the liquidity in the market.

The bourse, which has recently been upgraded to 'emerging' market by the global index compiler Morgan Stanley Composite Index (MSCI), finds "growth opportunities in remote membership".

The remote membership is likely to be rolled out in the third phase of development, according to sources.

At present, the QSE has 11 brokerage companies, which include four subsidiaries of local commercial banks.

The conventional brokerage outfits are the Group Securities, Dlala Brokerage, Dlala Islamic, Qatar Securities Company, Islamic Brokerage, International Financial Securities and Gulf Investment Group.

The four banking brokerage subsidiaries are QNB Financial Services, Commercial Bank Investment Services, Ahli Brokerage Company and Al Rayan Financial Brokerage.

Remote members are foreign brokers based abroad and the move to allow them could enhance liquidity in the market. This will gain traction, once the QSE allows derivatives because many derivatives exchanges provide for remote access, and also introduce multi-currency trading.

Indicating the advent of derivatives, efforts are now afoot to introduce omnibus accounts, which are expected to come once the central counterparty (CCP) is in place during the exchange's second phase of development.

An omnibus account is an account carried by one futures commission merchant with another futures commission merchant in which the transactions of two or more persons are combined and carried in the name of the originating broker, rather than designated separately.

The remote membership access ought to facilitate cross-border trading in a cost effective way, and thus eliminate barriers to enhance liquidity in the market, according to market sources.

However, they said market liquidity should improve, depending on which the bourse is planning to introduce exchange traded funds, derivatives and real estate investment trusts as part of measures to expand the investment universe to investors.

The need for regional integration and the heat of global competition have forced many bourses to devise futuristic expansion, which include allowing remote membership and entering into strategic alliances.

An exchange with remote access can offer intermediaries direct access to information, lower transaction cost, increased liquidity and better price discovery.

Highlighting that the QSE has achieved improvements in the operational efficiency, its CEO Rashid bin Ali al-Mansoori had told the recently concluded Arab Federation of Exchanges (AFE) Equities Summit that "the road does not end here. We have a long way to go."

Stressing that QSE has identified a number of other areas that will allow it to capitalise on the emerging market classification, he had said "initiatives like expansion of securities lending and borrowing, margin trading, omnibus accounts, risk management and the introduction of a CCP will add further confidence to the robustness of the market infrastructure."

The move for a pan Arab company for securities clearing was mooted by Ahmed Saleh al-Marhoon, director general of the Muscat Securities Market, at the recently held annual general meeting of the AFE, considering the combined market capitalisation of Arab bourses in excess of $1tn.

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Publication:Gulf Times (Doha, Qatar)
Date:Jun 10, 2014
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