The Securities and Commodities Authority, the stock market regulator, plans to introduce three classifications of brokerage firms in an effort to reduce capital requirements.
The capital required to operate a brokerage house was increased from Dh20 million to Dh30m at the start of the financial crisis to encourage consolidation in the sector.
The regulator currently is in discussions with the UAE stockmarkets, brokerage firms and institutional investors to streamline three categories for the sector.
“Trading” brokerages will require Dh3m in capital. Whereas “trading and clearance brokerages” will need to have Dh5m in capital. The third category, which comprises “multi-services brokerages” that have licences for margin trading, financial advisory and equity research, will require Dh20m in paid-up capital.
“Let them breathe a bit”, said Maryam Buti Al Suwaidi, the deputy chief executive at SCA. “We hiked it before because we were in favour of consolidation.”
The bank guarantee required for brokerages to trade on the bourses was Dh20m but will now be eased to Dh1m.
There are 47 brokerage firms in operation, compared with 103 in 2010.
Surging prices and liquidity have improved the sector’s fortunes. In the third quarter, brokerages posted profits from trading commissions for the first time since the crisis.
“There are two to three companies that were suspended but now looking to return pending fulfilling their requirements,” Ms Al Suwaidi said.
Separately, the Abu Dhabi Securities Exchange chief executive, Rashed Al Baloushi, called for the unification of back office operations.
“It is much more important to unify the back office and settlement procedures for the two markets and then to the wider GCC,” he said.
halsayegh@thenational.ae