Qatar sets stock regulatory reforms, eases trading rule

Qatar sets stock regulatory reforms, eases trading rule

Central bank now ultimate market regulatory authority; Lengthens stock trading settlement time; Applications for bank brokerages to be reviewed in 30 days; Qatar Financial Centre to encourage stock listings

July 18, 2012 5:26 by Reuters

Qatar has announced financial reforms giving ultimate regulatory authority over the country’s stock market to the central bank, lengthening the settlement time for institutions’ stock trades, and expediting the creation of banks’ brokerage arms.

A circular sent to financial firms this week by the Minister of Economy and Finance said the central bank had taken the place of the Qatar Financial Markets Authority (QFMA), which oversees the stock exchange, as the country’s supreme stock market regulatory authority.

“It’s essentially another monitoring channel placed upon the QFMA, a regulator to regulate the regulator,” said Ahmed Shehada, head of trading at Qatar National Bank Financial Services.

In March, Qatar’s finance minister said the central bank governor had become the chairman of the Qatar Financial Centre Regulatory Authority (QFCRA), in a step towards establishing a single regulator for the country.

Qatar announced five years ago a plan for a unified market watchdog which would make the regulation process simpler and clearer for companies. The plan would combine the central bank, the QFCRA and the QFMA in one entity. Progress towards this goal has been slow, however, partly because of the complexity of the reform process.

SETTLEMENT

This week’s circular, seen by Reuters, also said some local investors on the stock exchange would be given more time to settle trades. A decree asked brokers to grant “trustworthy Qatari establishments and individuals” T+3 settlement, meaning money for a purchase could be paid three days after the trade.

Qatari investors previously had to make upfront payments before orders could be executed. Brokers will now send a list of recommended clients, companies or individuals for approval by the QFMA.

“It’s really just to help manage counterparty relationships,” Shehada said. “Hopefully, these positive steps will entice local corporations and individuals to be more active.”

Stock trading volumes in Qatar have been weak this year and particularly in the past five weeks, while the neighbouring markets of Saudi Arabia and Dubai have enjoyed a massive if temporary surge of investor interest. Doha’s benchmark index is trading 5.5 percent lower year-to-date, making it the worst-performing market in the Gulf Cooperation Council.

“This was a long-anticipated move towards increasing liquidity in the market,” said Yassir Mckee, wealth manager at Al Rayan Financial Brokerage. “It will make payments easier for semi-government entities, listed companies and reputable high-net-worth individuals.”

A market source said, “Brokerages are still on the hook. They have to settle payments within three days so they have to be careful to screen the clients, whether by their cash flow or credit history. We have yet to see how long it will take for prior approval of recommended clients.”

The ministry also granted licences to conduct custodian services to Qatar National Bank and Standard Chartered Bank. International investors often place stock trades through custodian banks, which have three days to settle payments.

BROKERAGES

The circular formally allowed Qatari banks to obtain brokerage licences, stating that the QFMA must respond to all applications within 30 days.

Some banks have expressed interest in offering brokerage services, though regulatory limits on the activities they will be able to conduct has caused them to proceed cautiously.

The ministry urged the Qatar Financial Centre to encourage companies registered with the centre to list themselves on the stock exchange, with priority for companies at least 51 percent owned by Qataris. (Editing by Andrew Torchia)