FSRA proposes changes to capital market rules and plans launch of spot commodity trading

The regulator of Abu Dhabi's financial free zone says the amendments will significantly enhance its virtual assets framework

The proposed changes to ADGM rules will benefit markets-related activities, including virtual assets, securities, derivatives and commodities. Victor Besa / The National

The Financial Services Regulatory Authority of Abu Dhabi Global Market is proposing amendments to its capital market regulations designed to significantly enhance its virtual assets framework and to introduce spot commodities trading and emissions allowance rules.

The wide-ranging amendments, covering virtual assets, securities, derivatives, commodities and benchmarks, are aimed at reinforcing ADGM’s capital market ecosystem, enabling greater participation within the financial centre’s primary and secondary markets, the FSRA said on Monday.

The regulator has already published a consultation paper, and responses from stakeholders should be submitted by May 20.

“The proposed enhancements to our capital markets framework will serve to unlock the next stage of investment and growth opportunities, including in virtual assets, spot commodities and emission allowances,” Ahmed Al Zaabi, chairman of ADGM, said.

“These amendments will strengthen our innovative leadership in virtual assets and commodities trading regionally and internationally.”

The ADGM, one of the fastest growing international financial centres, is part of Abu Dhabi's efforts to diversify its economy and connect the emirate with markets in the Middle East, Africa and South and East Asian economies.

It is home to thousands of companies including global businesses, financial institutions, treasury centres, professional services firms, small and medium enterprises, start-ups and FinTech companies such as digital asset trading entities.

The FSRA has been upgrading and amending regulations since its inception to mitigate risks and make ADGM an attractive space for home-grown, regional and international companies.

The proposed amendments will position ADGM and Abu Dhabi as the “jurisdiction of choice”, Mr Al Zaabi said.

The amendments fall across FSRA’s financial services and markets regulations, as well as the market rules, market infrastructure rules, conduct of business rules, Islamic finance rules and fees rules, among others.

In 2018, the FSRA launched a framework for the trade of virtual assets by businesses, including platforms such as multilateral trading facilities, custodians and brokers.

With the publication of the consultation paper, ADGM is launching its transition to Virtual Assets Framework 2.0, the FSRA said.

In the past four years, ADGM has seen a “significant growth” in the number licensed companies offering virtual asset-related activities, with 11 fully licensed and approved in-principle virtual asset companies.

The proposed changes include amendments to the risk disclosure requirements and allowing regulated multilateral trading platforms and custodian groups to conduct non-fungible token activities, it added.

ADGM is also proposing a new regulatory framework for spot commodity trading, becoming the first international financial centre in the Middle East and North Africa to offer a framework for the regulation of spot commodities and emission allowances.

Proposed changes also cover listed companies within the mining and petroleum segment and new regulatory requirements concerning benchmarking activities, the FSRA said.

With the new framework, ADGM aims to support Abu Dhabi’s economic plans to develop new markets in commodities such as carbon, hydrogen and ammonia.

ADGM has already developed into a commodities trading centre, with both physical markets and financial commodity derivatives markets.

In February, Thailand’s state-owned oil and gas company PTT opened a trading office at ADGM. PTT joined the growing energy trading community based at ADGM, which includes Adnoc Global Trading, Adnoc Trading, ICE Futures Abu Dhabi, which launched Murban Futures in March 2021, and India’s Reliance Industries, which opened its trading office in October 2021.

ADGM is also proposing to enhance its regulatory framework to enable offers and listings by petroleum and mining companies. It aims to attract companies in their growth phase by offering flexible capital structures and avenues to raise financing.

Proposed changes include offering of new shares to new investors, representing up to 20 per cent of a company’s existing share capital per year, without triggering the pre-emptive, anti-dilution rights of existing shareholders, the FSRA said.

“The significant enhancements to our capital markets framework is part of the FSRA’s objective to continue to develop ADGM’s comprehensive regulatory framework to further enhance its vibrant financing ecosystem,” Emmanuel Givanakis, chief executive of the FSRA, said.

“Collectively, our regulatory framework caters to the funding needs of a wide range of companies at different stages of their growth and life cycle.”