Brokers ready to employ new system says DFM
Dubai, May 29, 2011
Dubai Financial Market (DFM) announced today that its licensed brokers and custodians are fully ready to employ the newly introduced settlement mechanism called “Delivery versus Payment” (DvP).
DFM went live with DvP on April 28, placing the exchange amongst leading regional markets adopting this mechanism. As of today, members and custodians can execute trades based on this internationally acclaimed model, it said.
Commenting on this development, Essa Kazim, managing director and CEO, Dubai Financial Market (PJSC) said: “We are extremely delighted to see our members who deal with custodian banks’ clients in particular, are ready to fully utilise DvP. The introduction of this model reflects DFM’s ongoing commitment to develop the exchange’s infrastructure and adopt international best practices. We would like to extend our sincere gratitude to the UAE Securities and Commodities Authority (SCA), brokerage firms and custodians for their collaboration with DFM and support which helped us to successfully accomplish this significant step.”
It is noteworthy that the DvP plays an integral part in safeguarding investors’ rights and under this new mechanism the investor who deals with the custodians, will be able to reject sell or buy trades in case it fails to match the order. As a result, this mechanism limits the risk related to transactions and ensures the transfer of ownership of securities from the seller to the buyer concurrently with the transfer of the transactions’ value from the buyer to the seller.
Furthermore, this mechanism ensures local custodians have full control of the securities, reject sell and buy trades and thus make it unnecessary to run dual accounts, the statement said.
The upgrade is aimed at achieving the 'emerging market' status from influential index complier MSCI. Market participants were given time till May 29 to implement the process.
After snubbing the UAE for a second time in 2010, index compiler MSCI warned domestic bourses must change from dual account structures such as separate custody and trading accounts.
MSCI will announce in June whether it will upgrade the UAE and Qatar from the 'frontier markets' category, a move that could open up the countries' bourses to multibillion dollar liquidity and drive index fund investments.
Many traders are pessimistic over whether MSCI will upgrade the UAE, with low volumes and regional political unrest cited as likely deterrents. – TradeArabia News Service and Reuters