Reform in the works with new market laws

Trading is poised for significant reforms in the months ahead, even though many of the major changes to the UAE's market structures remain works in progress.

The changes include new rules meant to improve the Emirates' chances of securing a long-anticipated upgrade by the index compiler MSCI to "emerging market" status.

The next few months are expected to involve sweeping changes in market regulation, with new rules from the Dubai Financial Services Authority (DFSA) said to be imminent.

"We're ready to rock and roll with our new market laws," said a DFSA official. "We're waiting for the new market rules to be enacted by His Highness Sheikh Mohammed."

But new regulations affecting the Abu Dhabi Securities Exchange and the Dubai Financial Market may be further off.

In November, the Securities and Commodities Authority (SCA) published draft regulations that would enable short selling, securities lending, market making and liquidity provision - features of international capital markets that are currently not permitted on local bourses.

MSCI previously cited the implementation of these laws as a way for the UAE to iron out the creases in its market infrastructure, especially concerning the delivery-versus-payment (DvP) system. Concerns about the DvP system were pivotal in the Emirates' failing twice last year to secure an upgrade to the MSCI Emerging Market Index. MSCI's index tracks US$3.8 trillion (Dh13.95tn) of global equities.

The SCA is also expected to gain oversight of much of the country's managed funds. At present, supervision of this industry resides with the Central Bank.

It is hoped the laws on fund management will be finalised by the end of June, while the other regulations are still under discussion, said a spokesman for the SCA.

Provisions for corporate governance of UAE firms, contained in the Companies Law and approved by the Cabinet in December, were expected to provide the biggest headache for listed companies, said Lisa Kelaart-Courtney, the head of compliance services at Clyde and Co.

"It's going to be a serious overhaul for those companies to apply it if they don't already comply," she said. "It's not just going to be public disclosure requirements. There will be needs for management disclosures, audit standards, codes for directors, terms of references, management information, systems of control, conflict-of-interest management - and the list goes on."