Esca plans new financial vehicles

Abu Dhabi: The Emirates Securities and Commodities Authority (Esca) is planning to introduce new fin-ancial instruments - including derivatives, futures and options - early next year, according to a top official.

The authority is also working on a regulatory framework to introduce the concept of the market-maker, a proposal that followed the markets' slowdown in 2006, and that was endorsed by the central bank.

"It is one of Esca's leading priorities to continue in the development of the securities legal infrastructure. We are currently working on finalising the amended version of the authority's law," Adbullah Al Turaifi, Esca's chief executive officer, told Gulf News yesterday.

The new regulatory framework includes more severe disciplinary measures against violators, hence enabling the market regulator to better supervise the trading activities.

Regulations

"We are also in the process of producing a set of regulations that are intended to regulate new financial instruments and activities like but not limited to derivative securities, investment funds and market making," he said.

The new regulations and instruments are expected to see the light by the beginning of 2008.

"We expect to finalise these regulations by the end of this year. Upon completion, the Esca will examine strategies for the implementation and enforcement of these regulations," Al Turaifi said.

The UAE's relatively young equities markets have been growing consistently during the past few years, attracting substantial foreign interest.

Nevertheless, the more sophisticated financial institutions, including hedge funds, are still unable to tap into the markets due to the absence of the necessary investment vehicles.

"Such new instruments will contribute to the enhancement of the UAE markets, giving them more depth and diversity," commented Nabeel Farhat, managing director of Al Fajr Securities.

Opportunities

"The regulatory framework to be introduced by Esca, will present the markets with new financial vehicles, and hence providing for more investment opportunities, and less cost for finance," he said.

New parameters will also be set for market makers, a requirement that most officials and experts agree to. They stress the need for protecting investors from steep declines and sudden market crashes.

"The Esca is also in the process of preparing market-making regulations; we expect to complete it by the end of this year.

"The Esca is also surveying strategies to move to a market-making scheme. Such a major development needs careful planning and the input of all concerned parties," Al Turaifi said.

Esca has an ambitious operating plan for 2008.

It includes vital development programmes in many areas, including the legal environment, financial and investment awareness, supervisory and enforcement functions and other endeavours that will enhance the role and effectiveness of Esca in the financial securities and commodities industry, according to Al Turaifi.