Dubai: Equiti has become one of the first international brokerage firms licensed by the UAE regulator to offer OTC (over the counter) margin trades for clients here. This means that based in the UAE, they can use the Equiti platform to place trades internationally on equity, commodities, currencies, and other financial instruments.
And with the benefit that these transactions come under the regulatory purview of the Securities and Commodities Authority. The license does not cover trades in the UAE stock markets.
For Iskandar Najjar, CEO of Equiti, winning the license fits in well the shift in trading patterns done online over the last two years. “There’s been a huge wave of trading that’s been happening where such trades are becoming more of a lifestyle today – a daily fact of life,” said Najjar. “It happened during the lockdown phase and then picked up with the crypto wave. Transacting online on financial assets is no longer confined to a section of the investor audience out there.”
Truly universal
UAE’s investor base sure has expanded in this timeframe. Global stock markets having had two bumper years for the best part of the last two years brought many retail investors into the fold. For most of them, it was dictated by a fear of missing out on the growth. Of course, Bitcoin had its part too.
We want to be a vehicle for clients to be able to trade and execute on one single platform across all aspects.
Equiti thus wanted to be in the “heart of this space at a critical time” and the new wave of legislation that was emerging was another factor. (Worldwide, a host of trading platforms such as Robinhood brought in waves of new investors online, which too had a part to play in the run up of stocks, at least some of them.)
What does the OTC license mean?
On May 9 2021, the SCA brought out a new and consolidated ‘Rulebook’, which brought about major changes to securities trading and brokerage regime in the UAE. It set out updated guidelines for licensing and requirements for SCA-licensed firms. The move also consolidated existing regulations for financial activities in respect of securities.
Traders in this region are financially secure to make bets on such highly volatile commodities - it’s a different case in other regions where people go in for more stable options.
Like the regulatory regimes at DIFC and in ADGM, licensing categories were introduced ranging from Class 1 (brokers) to Class 5 (advising and arranging) to determining licensing and prudential requirements applicable across the board.
The SCA also brought in oversight of a new activity for the first time, which is the over-the-counter derivatives trading and spot foreign exchange, which falls within Class 1 category. The ‘stringent’ requirements set by SCA includes the higher paid-up capital requirements for this activity.
A DGCX presence
“It opens up trading opportunities to a wider set of assets, whether that’s equity, indices, commodities or currency,” said Najjar. “To initiate trades, accounts can be opened locally and they will be protected by the regulator.
“We have been operating as a clearing member with DGCX (Dubai Gold & Commodities Exchange) on bullion and other commodity contracts for years now. New regulations matter much when it comes to giving markets the depth they need.”
Equiti is licensed in Jordan, London and Kenya. For now, its focus is on the UAE, with similar capital market regulations still some time away from coming to fruition in the other GCC economies.
Recently, Abu Dhabi became the first to set up a regulatory framework for SPAC (Special Purpose Acquisition Company), and which too should propel more capital market exposure for companies and investors.
Mohamed Al-Ahmad, CEO of Equiti Securities Currencies Brokers and co-founder of Equiti Group, said: “With the addition of our new UAE license, our clients in the region can be confident that they are dealing with one of the most well-regulated and progressive brokers in the Middle East. We are proud to be operating in the UAE, a market that is committed to world-class regulation and implementing global best practices.”
“For us, that would be the next evolution,” said Iskandar Najjar. “There’s no denying the influence crypto assets are having in expanding the investor base here that’s transacting online.”
To fill in the knowledge gap, Equiti is working with government entities to collaborate and draft curriculums to upgrade and upskill financial literacy across the whole sector.
