CBB announces guidelines for short selling, security lending

Central Bank of Bahrain (CBB) yesterday announced a resolution introducing short selling of securities as well as giving securities on loan into the capital markets ecosystem of Kingdom. The resolution No. (23) issued by the top bank says that it is “for the Issuance of Regulations in respect of Short Selling and Giving Securities on Loan.”

Further citing Article (92) of the Decree No. (64) of 2006, the bank states it would “specify the types of securities, which may be traded by loan and short sale, the terms and procedures of such transactions and the rights and obligations of all concerned parties”. Licensed Exchange and the Licensed Clearing House, the CBB statement said, shall issue their own rules and guidelines and shall establish controls and procedures related to dealing in securities through lending and borrowing and short selling according to the provisions stipulated in the Resolution.

“The objective of this Resolution is to improve the efficiency of the capital markets in the Kingdom by promoting new investment and trading strategies through diversification of investment instruments which shall result in better price discovery, enhanced liquidity and attracting new sophisticated investors,” said Abeer Al Sheikh Ebrahim Al Saad, Director of the Capital Markets Supervision Directorate at the CBB.

She said that the Resolution encompasses the controls and procedures pertaining to lending, borrowing and short selling of eligible securities, the obligations of the related parties, and makes reference to guidelines and instructions necessary to implement the requirements of this Resolution. Sheikh Khalifa bin Ebrahim Al-Khalifa, Chief Executive Officer of Bahrain Bourse and Vice Chairman & Managing Director of Bahrain Clear stated, “The roll-out of this market feature within the capital market is expected to attract significant international investment interest as well as form a stepping stone towards the achievements of an Emerging market status.”