Dubai Financial Market has seen some mixed trading in recent days, with sentiments hobbled by concerns over a COVID-19 led downturn. Image Credit: Gulf News Archive

Dubai: Dubai Financial Market has launched two subsidiaries - Dubai Clear and Dubai CSD, with Dubai Clear being the region’s “first independent company central counterparty (CCP) for equity clearing”.

The move comes as part of a wider effort to upgrade local stock markets to a 'developed' status.

Dubai CSD will be the UAE’s first independent central securities depository (CSD) company.

“This is a significant step towards implementing a roadmap for upgrading the UAE financial markets to advanced market status,” said Sultan bin Saeed Al Mansoori, Minister of Economy and Chairman of the Securities and Commodities Authority.

Both have received regulatory approvals from the Securities and Commodities Authority (SCA) and Dubai’s Department of Economic Development (Dubai Economy).

The SCA set the ball rolling for licensing CCPs by issuing the Board Chairman’s Decision No. (22/R.M) of 2016, which intended to regulate the clearing of securities trades. And also redistribute financial market functions from a “vertical model to horizontal model” under which separate companies will be licensed for CCP and another for depositories.

Tuesday's launch marks DFM’s efforts of the past two years to upgrade market structure and post trade services in line with international best practices.

Collateral linkage

As for Dubai Clear, it will provide for the “Central Counter Party” (CCP) function. “The introduction of a CCP ensures efficient use of collateral by clearing members to optimise market liquidity in accordance with international best practices, where collateral usage is linked to market risk,” said Maryam Fekri, CEO of the Dubai Central Clearing & Depository Holding.

“The CCP is also necessary for DFM’s derivatives strategy, in addition to complying with the CCP regulations introduced by SCA in collaboration with the UAE markets.”

User base

The two companies can tap into a DFM investor base that exceeds 844,000. “The launch of Dubai Clear and Dubai CSD is in line with DFM’s strategy to meet local and global regulatory requirements by ensuring robust market infrastructure,” said Essa Kazim, Chairman of the DFM, in a statement.

Parent company
Dubai Clear and Dubai CSD are incorporated under the umbrella of the Dubai Central Clearing & Depository Holding, a holding company for post-trade services and fully owned by DFM.