The Muscat Stock Exchange (MSX) and Muscat Clearing and Depository (MCD) recently introduced new regulations governing Bilateral Securities Lending and Borrowing (SLB) activities, as well as Covered Short Selling (CSS), with the aim of enhancing market efficiency and improving liquidity. These regulations provide market makers, liquidity providers, and liquidity funds with new tools that enhance trading stability and open up new investment opportunities. By updating capital market systems and legislation to align with global developments, the MSX and MCD are addressing local market needs and supporting the sustainability of the market.
The new regulatory framework subject CSS to MSX regulations outlined in Decision No. 143 of 2024, while Bilateral SLB activities will be governed by Decision No. 2 of 2024, along with procedural rules and guidelines issued by MCD. Haitham Al-Salmi, CEO of MSX, highlighted that these regulations will reshape investment strategies by providing innovative methods for market makers and liquidity funds to diversify their portfolios and manage risks effectively. This will enhance liquidity, create a more dynamic trading environment, and boost investor confidence while complying with regulatory requirements for greater security.
Mohammad Al-Abri, CEO of MCD, emphasized that the Bilateral SLB regulations are a strategic step toward improving market efficiency, increasing liquidity, and enhancing flexibility. This feature aims to support market stability, provide investors with more opportunities to maximize their returns, and ensure transparent execution of lending and borrowing operations. By adhering to the highest standards of safety and compliance, MCD aims to meet investors’ needs and enhance trust in the Omani market. These activities are crucial in positioning MSX as an Emerging Market and attracting global institutions and investors.
The regulations on Bilateral SLB allow borrowers to temporarily transfer or buy securities outside the market on a deferred payment basis, with an obligation to return or repurchase the securities at the lender’s request during the agreed period. This activity aims to increase market liquidity, improve efficiency through continuous buy and sell offers, and provide market makers with an emergency reserve of securities when needed. The smooth and transparent operation of these lending and borrowing activities is the responsibility of MCD, which manages collateral and oversees the transfer of securities between lenders and borrowers.
In terms of eligibility, lending is open to state institutions, licensed financial institutions, insurance and reinsurance companies, and investment funds meeting certain asset criteria, providing institutional investors with more ways to diversify their portfolios. On the other hand, CSS activity allows Sophisticated investors to sell borrowed securities, with regulations ensuring transactions are executed at or above the last traded price. MSX and MCD encourage interested parties to review the detailed regulations and procedures for Bilateral Securities Lending & Borrowing and Covered Short Selling on their official websites.
Overall, the issuance of these regulations signals a significant step towards the development of the capital market in Oman. By providing new tools and opportunities for market participants, MSX and MCD are enhancing the liquidity and efficiency of the market, anticipating an increase in trading volumes and attracting global investors. These regulations aim to modernize the Omani market, aligning it with global standards and fostering a dynamic trading environment that benefits all investors and stakeholders.
