Dubai: The Securities and Commodities Authority (SCA) has emphasised that the mechanisms and regulations of trading on the UAE's financial securities markets do not permit and do not support short selling unless it is governed by SCA's board decision regarding regulations of short selling of securities.
The UAE's market regulator made the statement in response to recent reports in some newspapers claiming that short selling has negatively affected the performance of the index of financial markets.
SCA further emphasised that all short selling transactions constitute a clear violation of SCA's regulations and legislations and that violators are liable to due legal action.
According to SCA's Board Decision No. 48 of 2012, short selling is the sale of a security or other financial instrument that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security's price will decline, enabling it to be bought back at a lower price to make a profit.
According to SCA's regulations, only licensed market makers are permitted to do short selling. Any other cases should be approved by SCA. Licensed market makers are broker-dealer firms that accept the risk of holding a certain number of shares of a particular security and are willing to quote both bid and offer prices for an asset.
SCA urged all people who are aware of any illegal short selling transactions to notify the SCA or file a complaint so that the regulatory body would launch investigation into the violations and impose due punishment on the violators as per the relevant laws.
