As part of Bahrain Bourse's (BHB) efforts to develop the Capital Market in the Kingdom of Bahrain and enhance market liquidity, and following the approval of the Central Bank of Bahrain (CBB), Bahrain Bourse announces the launch of 'Technical (Uncovered) Short Selling Guidelines' to market participants through authorized brokerage firms, which aims to increase liquidity levels as well as diversify investment and hedging instruments in order to attract new investors.
The newly introduced guidelines supplement the existing Market Rules of Bahrain Bourse and are designed to regulate 'Technical (Uncovered) Short Selling', where the seller does not possess the eligible securities at the time of sale or has not arranged for their borrowing before the short sale is made but commits to settle within the applicable settlement period T+2. According to the guidelines, 'Technical (Uncovered) Short Selling' is only permitted to authorized brokers and qualified investors.
According to the newly introduced guidelines, the framework includes a number of measures to regulate the short-selling service including, trade suspensions for a minimum of 5% drop in the reference price of a given stock or if short sold securities reach 10% of the total capital issued. Bahrain Bourse has also implemented a clear framework under which trades should take place.
Shaikh Khalifa bin Ebrahim Al-Khalifa, Chief Executive Officer of Bahrain Bourse, commented, “The guidelines introduced are part of Bahrain Bourse's ongoing strategic efforts to enhance market liquidity and falls in line with the 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 for brokers and qualified investors. This significant step empowers investors, particularly qualified ones, to utilize new trading strategies and diversify their investment portfolios," Shaikh Khalifa added.
It is worth noting that eligible Members must be authorized by BHB to conduct Technical (Uncovered) Short Selling activities as outlined in the guidelines. Technical (Uncovered) Short Selling is applicable to eligible securities as approved by BHB, subject to regular review, to ensure a secure, dynamic and adaptable market environment.
For further inquiries, members can visit Bahrain Bourse's website www.bahrainbourse.com or contact the Trading Operations Directorate on: 17108778 or email: [email protected].