Manama, July 24 (BNA): As part of its efforts to develop Bahrain’s capital market and increase market liquidity, the Bahrain Stock Exchange (BHB) has announced the introduction of technical (uncovered) short selling guidelines for market participants through licensed securities firms, with the approval of the Central Bank of Bahrain (CBB), with the aim of increasing liquidity levels, diversifying investment and hedging instruments and attracting new investors.
The newly introduced guidelines supplement the Bahrain Stock Exchange’s existing market rules and are intended to regulate “technical (uncovered) short selling”, which occurs when the seller does not hold eligible securities at the time of the sale or has not made any borrowing arrangements prior to the short sale, but has committed to settle within the applicable settlement period T+2. According to the guidelines, “technical (uncovered) short selling” is only permitted for licensed brokers and qualified investors.
According to the newly introduced guidelines, the framework includes several measures to regulate short selling services, such as halting trading if the benchmark price of a particular stock falls by a minimum of 5% or if the securities sold short reach 10% of the issued capital. The Bahrain Stock Exchange has also implemented a clear framework within which trading must take place.
Sheikh Khalifa bin Ebrahim Al Khalifa, CEO of Bahrain Bourse, said: “The introduced guidelines are part of Bahrain Bourse’s strategic efforts to increase market liquidity and are in line with its Financial Services Sector Strategy and aim to regulate ‘technical (uncovered) short selling’ in line with international best practices and standards. The guidelines also aim to promote market efficiency and transparency, and enhance pricing efficiency.”
“It is essential to establish a robust regulatory framework for technical (uncovered) short selling, including clear rights and obligations of brokers and qualified investors. This important step will enable investors, especially qualified investors, to take advantage of new trading strategies and diversify their investment portfolios,” Sheikh Khalifa added.
Please note that eligible members must receive approval from the BHB to undertake technical (uncovered) short selling activities as outlined in the guidelines. Technical (uncovered) short selling is subject to regular review to ensure a safe, dynamic and adaptable market environment and applies to eligible securities approved by the BHB.
For further enquiries, please visit the Bahrain Bourse website at www.bahrainbourse.com or contact the Exchange Operations Department on 17108778 or email membersaffairs@bahrainbourse.com.
HF
