UAE regulator introduces new rules to promote mergers

13 September 2010

Brokerage mergers encouraged to overcome slump in trading volumes

The Securities & Commodities Authority (SCA), the UAE’s financial regulator, has amended its brokerage merger rules, as stock brokers struggle with the lowest trading volumes in four years.

The SCA’s reconstituted board approved a memo amending certain regulations, which calls for amalgamation of brokerages in the country to be in the form of either acquisitions or mergers, according to a statement published by the regulator on 12 September.

The board also approved reducing the minimum number of broker representatives from four to two. The resolution is now pending approval from the SCA.

Twelve firms have filed requests to the regulator to halt operations this year amid rising costs and falling revenues. Meanwhile, seven firms suspended operations in 2009 and three in 2008.

The Dubai Financial Market (DFM) General Index has fallen 12 per cent to date this year, while the Abu Dhabi Securities Exchange (ADX) has fallen just over 10 per cent.

In August this year, Shuaa Securities, the brokerage unit of investment bank Shuaa Capital, predicted that the number of UAE brokerages could fall to as low as 55 from 81.  

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