Dubai exchange appoints HSBC as first general clearing member

abdelaziz Fathi

Dubai Financial Market (DFM), the Gulf’s only listed stock exchange, reported that it has on-boarded HSBC as the first international clearing member, according to a corporate statement.

Nasdaq Dubai leads the world in sharia compliant securities

By joining the DFM as a general clearing firm, HSBC is able to provide clients with access to higher liquidity, with tighter spreads than they get via offshore platforms. This includes clearing and settlement services to its customers worldwide and to other DFM trading members.

Per DFM’s regulation, this type of membership implies the separation of trading and clearing memberships to allow foreign financial institutions to provide clearing services to non-resident banks, companies and individuals operating on the Dubai bourse. Overall, the introduction of GCM service is part of a wider collaboration program between DFM and HSBC to enhance market infrastructure and connectivity with international and institutional investors.

DFM currently offers a CCP service for clearing derivatives trading on its subsidiary Nasdaq Dubai. As a central counterparty in the equities market, DFM’s CCP entity, which is part of a wholly owned post-trade subsidiary, takes on the role of legal counterparty for both the original purchaser and the original seller from the time an order is matched on the exchange.

The DFM is regulated by the country’s main financial watchdog, the Securities and Commodities Authority (SCA). Both entities are in collaboration to process similar applications from other clearing members.

Dubai is liberalising securities rules

Hamed Ali, CEO of DFM and Nasdaq Dubai, said: “We are delighted to welcome HSBC as the first international GCM on DFM. The introduction of HSBC’s GCM service on DFM is a key step toward a series of enhancements to market accessibility planned as part of our growth strategy. HSBC’s regional and international footprint and capital markets expertise will, I believe, help accelerate our growth plans.”

Abdulfattah Sharaf, chief executive officer, HSBC UAE and head of international, HSBC, added: “Being the first international general clearing member on the Dubai Financial Market aligns well with HSBC’s ambition to be the preferred international financial partner of our clients around the world. The appetite of international investors for securities issued by governments and corporates in the region is large and growing and our new role as a general clearing member on the DFM will enable clients across HSBC’s global network to invest in the potential here.”

The UAE’s market regulator, the Securities and Commodities Authority (SCA), has been liberalising securities rules in recent years, partly to secure an upgrade in its status to ‘advanced’ from ’emerging’ market by equity benchmark provider MSCI.

The introduction of clearing members reduces the risk exposure between participants in the central securities settlement process, whilst increasing confidence in the local market infrastructure. The DFM said that while market participants are currently required to maintain 100% collateral value for purchase trades, a central counterparty structure will reduce transaction costs for brokers. This is due to the number of settlement transactions carried out being reduced by means of transaction netting – in other words, only net positions are submitted for settlement.

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