“The clearinghouse” keeps pace with financial market developments with accurate “arbitrage” mechanisms for double-listed stocks

Simplification and facilitation of the procedures for trading in shares of double or triple listed companies
Develop and improve the Kuwaiti market and highlight investment opportunities and solutions

Measures continue to extend the scope of cooperation between the Kuwait Stock Exchange and the Gulf and Arab financial markets, as well as the Kuwait Clearing Company and the clearing houses in the surrounding markets, with the aim of achieving the highest levels of bilateral coordination to reach. or triple listing of companies among the financial markets in the region, and to achieve a formula that ensures that they monitor changes in records its shareholders.

According to the joint co-operation agreement signed between Boursa Kuwait and the Kuwait Clearing Company with the Abu Dhabi Securities Exchange, the parties involved intend to simplify and facilitate trading procedures on the shares of bilateral or triple listing companies in a manner that facilitates the implementation of inventory. operations between the two markets through “arbitrage” mechanisms, or the transfer of shares between records Shareholders in the two markets and the handling of the dissolution of shares on capitalization and distributions, if any.

Sources said the stock exchange is keen to develop and improve the Kuwaiti market and highlight investment opportunities and solutions, and expects the cooperation agreement with the Abu Dhabi market to attract more local and international investors to the Kuwaiti and Emirati markets. .

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The Kuwait Clearing Company has kept pace with the ways of development, but rather pioneered the matter by updating the companies’ records and working with banks on the issue of providing an appropriate atmosphere for the receipt and transfer of profits. and other mechanisms of interest. of cooperation with any Gulf, Arab or international market, while the agreement with the Abu Dhabi market represents a point Important with regard to the exchange of experiences, knowledge and visions at the work level.

new Horizons

The sources noted that the agreement will significantly contribute to the development of the two markets, despite the effects of the Corona pandemic during the last period, which reveals the “cleaning office”‘s attempt to open new horizons to commercial cooperation improve and long-term investment relationships with specialized circles locally, in the Gulf and regionally.

In the past, the lack of accuracy in the operations of stock transfers and the automatic coupling between the markets have revealed wholesale loopholes identified by the “clearing house” to address it technically.

Especially with regard to double-listed shares, where various speculative circles have been exploiting the matter for years, but the cleaning organization at the “clearance” is witnessing a large qualitative leap under its current management.

Regarding the setting of standards for the transfer of shares between markets, the sources confirmed that the “clearing house” has largely succeeded, as the automatic link prevents the alienation of shares that are not the trading account held for the individual or the company designated, has not entered, otherwise the brokerage firm will be exposed to a high risk, and may result in Accept any exposure that clients may cause.

Action Package

The capital market system, including the clearing house, is now ready to deal with any future emergencies, as the Capital Market Authority has supported the system with a package of measures that keep pace with successive developments, focusing on the implications of potential failures in settling security transactions. to a large extent.

The responsible authorities have prepared numerous legislation and controls to ensure the settlement of obligations arising from securities trading, by providing different layers of protection provided by the participating parties according to the established stages of development. According to the final stage of market development, it is expected that the levels of protection will be applied in accordance with the best international practices represented in the establishment of the Settlement Operations Guarantee Fund.

7 layers of protection

There are 7 layers of protection that will accompany the final stage of market development, as follows:

1- The financial guarantee of the brokerage firm, which is considered to be the beginning of the confrontation in case the client is exposed, to protect against the typical operational risks that are expected to occur.

2- The financial guarantee of each clearing member according to the type of membership (direct member or general member) with the Central Broker for Security Transactions (CCP).

3- The financial guarantee provided by the central counterparty broker.

4- Financial guarantee for all non-failed cleaning members.

5- The assets of the failed cleaning member.

6- The assets of the central counterparty.

7- In the event that all the financial amounts available in the different levels of protection for each stage are depleted, the “Market Authority” has the right to direct financial intervention to restore the situation to what it was before the crisis took place. The government is eager to work with the “cleaning department” to achieve the highest levels of accuracy so as not to be exposed to failures or exposures that would affect the market, especially as the stock market has serious experiences in the light of the repercussions of the global financial crisis that started in 2009, which caused the exit of dozens of companies from the stock exchange, as well as from the financial intermediation sector, specifically of companies that were unable to cover the exposure caused by their clients , especially because some brokers open “cash” with fantastic amounts to clients, but the drop in prices at the time led to a big shock for the companies.

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