Margin trading on the Abu Dhabi Securities Exchange and Dubai Financial Market is to be delayed until next year to give brokers time to prepare for the new system, the financial regulator has announced. The Emirates Securities and Commodities Authority said it had delayed the move at the request of brokers after the issue was repeatedly raised during two meetings last week. Margin trading involves a trader borrowing money from a broker to buy stock.
In a statement, Esca said: "Its decision reflected its keen interest to give an opportunity for larger number of brokerage firms to jointly take advantage of the new system, the aim being to keep their client base intact." Original plans called for margin trading to be introduced at the end of this month. "It made no sense to implement margin trading now because it will have no positive effect on the market in the current conditions," Mohammed Ali Yasin, chief executive of Shuaa Securities, told Reuters.
"Margin trading was planned to be implemented to regulate the irregular margin lending, to make sure there was no excessive leverage and to encourage liquidity in the market. Now, these plans are not valid as banks have closed the taps on lending." Vyas Jayabhanu, the head of Al Dhafra Financial Broker, said the problem was that brokers were unable to secure funding for margin trading because most of their assets were in real estate, for which banks were not longer providing financing. afoxwell@thenational.ae