The UAE will allow issuance of warrants, a financial instrument that entitles the holder to buy the underlying stock of the issuing firm according to an article in Gulf News.
The new product will be allowed once the new rules approved by the board of directors of Securities and Commodities Authority (SCA) are published in the official gazette, an official at the SCA said.
Warrants are frequently attached to bonds or preferred stock as an attraction, allowing the issuer to pay lower interest rate or dividends.
The board presided over by SCA Chairman Sultan bin Saeed Al Mansouri gave a go ahead on the regulation. The move, which was published on the website of the authority, for industry feedback, for a long period of time, is aimed at deepening the securities market, which will get an estimated Dh1 billion portfolio investment after becoming part of MSCI Emerging Market, this year.
The board gave the directives for quick completion of studies on the regulation so that it can be passed in the first half of the current year.
In-depth study of best international practices as part of the SCA’s sustained efforts to enhance the legislative system of the local financial markets, the board approved the Regulation for Covered Bond.
In a statement, Minister of Economy and SCA Chairman Sultan bin Saeed Al Mansouri said with the issuance, listing and trading of warrants on the local markets, will certainly boost the local financial markets. The minister said the SCA has provided all the elements of success for the regulation to enable it achieve its targeted objectives and to play its role effectively, adding that the SCA had coordinated efforts with the concerned stakeholders in the local markets and the financial services advisory committee before issuing the regulation.
He said the new regulation provides a new investment tool for market investors, thus diversifying further investment tools options available to them and adding greater in-depth to the country’s financial markets.
Banks and financial institutions or a company can issue the instrument after obtaining a license by the SCA. The issuer must have a minimum capital ofDh100 million, an appropriate premise and all the necessary administrative and technical capacity and expertise.
The issuer shall also notify SCA of the fact that the market has suspended the trading of those bonds or the assets underlying the bonds.
After winning the MCSI Emerging Markets status last year, the UAE stock markets are under pressure to widen their depths by introducing new rules and regulations to strengthening the markets. New products, instruments are being developed in order to attract more foreign buyers into the country.