SCA Board Decision No. (48) of 2012.
Concerning the Regulations as to Short Selling of Securities
The Chairman of the Board of Directors of the Securities and Commodities Authority,
having perused
The Federal Law No. (4) of 2000 concerning the Emirates Securities and Commodities Authority
and Market, as amended;
The Federal Decree No. (18) of 2009 concerning the Formation of the Council of Ministers of the
United Arab Emirates;
The Council of Ministers' Resolution No. (108/7 and 5) of 2010 concerning the Restructuring of
the Board of Directors of the Securities and Commodities Authority;
The SCA Board Decision No. (1) of 2000 concerning the Regulations as to Brokers, as amended;
The SCA Board Decision No. (2) of 2001 concerning the Regulations as to Trading, Clearing,
Settlement, Transfer Of Ownership And Custody Of Securities, as amended;
The SCA Board Decision No. (3) of 2001 concerning the Regulations as to the Market
Functioning, as amended;
The SCA Board Decision No. (29 / r) of 2009 concerning the Regulation as to Safe Custody of
Securities;
The SCA Board Decision No. (17) of 2011 concerning the Regulations as to the Settlement
System on the Basis of Delivery Versus Payment (DVP), as amended;
The SCA Board Decision No. (46) of 2012 concerning the Regulation as to Market Maker;
The SCA Board Decision No. (47) of 2012 concerning the Regulation as to Lending and
Borrowing Securities;
Based on the approval of the Board of Directors at its 13th meeting of the Fourth Term held on
02/08/2012, and
After consultation and coordination with the Markets, and as required for the public interest,
Has decided as follows:
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Article (1)
Definitions
The following words and expressions shall have the meanings ascribed thereto below unless the
context indicates otherwise:
State/ UAE:
Law:
United Arab Emirates.
The Federal Law No. (4) of 2000 concerning the Emirates Securities
and Commodities Authority and Market.
Authority/SCA:
The Securities and Commodities Authority.
Board:
The Board of Directors of the Securities and Commodities Authority.
Market:
The Securities and Commodities Market licensed in the State by the
Authority.
Clearing:
The entity conducting settlement operations and issuing orders for the
payment of funds due to clients in the Market.
Broker:
The corporate person permitted under the provisions of the Law to
practice brokerage business in the Market.
Brokerage:
The process of executing the purchase and sale orders received from the
clients through the broker.
Securities:
Shares, bonds and notes issued by joint stock companies, bonds and
notes issued by the Federal Government or local governments, public
authorities and public institutions in the State, as well as any other local
or non-local financial instruments accepted by the Authority. .
Short selling:
When an investor sells securities that are not owned by him or sells
borrowed securities.
Market Making:
The activity which mainly depends on providing continuous prices for
the purchase and sale of certain securities to increase the liquidity of
such securities in accordance with the market maker regulations.
Market Maker:
The corporate person licensed to practice market making activity, or a
foreign market maker registered with the Market
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Article (2)
Cases of Short selling
Short selling may be carried out in the following cases:
1. A market maker to practice its activity in market making.
2. Any other cases approved by the Authority.
Article (3)
Securities Permitted for Short Selling
1. The Market shall determine the securities that are allowed for short selling in accordance with
the standards set by the Market and approved by the Authority.
2. Securities may only be short-sold after one month from listing in the Market.
3. Short selling may not be used for a security that is subject to the rights of subscription in
capital increase shares or in covered warrants.
Article (4)
Suspension of Short Selling
1. SCA may, at its own discretion or at the request of the Market, temporarily or permanently
suspend short selling for some or all securities in the event of exceptional circumstances that
may be detrimental to the Market, at the discretion of the Authority, including a sharp change
in the prices.
2. Short selling shall be stopped on the same day and the next business day for securities that
fall five percent (5%) or more in one trading day and no more than (10%) of the closing
price of the previous day. The Market shall determine the market rate upon which short
selling shall be stopped between the above two percentages.
Article (5)
Obligations of Dealers in Securities Short Selling
1. The broker may not execute any short selling transactions except after ensuring his client's
ability to deliver the securities which he wants to short-sell by the settlement date.
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2. The broker may not provide a total or partial guaranty for securities borrowed by his client to
settle a short- selling transaction.
3. The broker may not short-sell securities unless the price of the order is higher than the price
of the last executed transaction.
4. Short selling may not be used in order to prejudice the fairness and integrity of the Markets.
5. Securities short selling orders must be entered at a specific price.
Article (6)
Disclosure of Short Selling Positions
1. The Market shall disclose to the public on a daily basis and after the end of the trading
session the number of shares of listed companies, traded units of exchange-traded funds and
any other securities as determined by SCA that were short-sold
2. The Market shall disclose to SCA on a daily basis and after the end of the trading session,
any single investor position that was short-sold in excess of 0.25% of the actual number of
shares available for trading..
Article (7)
Failure to Deliver Securities
If the short-sold securities are not delivered on the settlement date the seller will have failed to
settle. Such settlement failure shall be addressed according to the procedures established by the
Market and approved by the Authority. The Market may provide the facilities it deems
appropriate to the market maker in connection with the settlement failure.
Article (8)
Market Oversight
1. The Market shall impose a fine on the broker or market maker who has failed to deliver the
securities that were short-sold in accordance with the by-laws of the Market as approved by
SCA.
2. The seller broker who has failed to deliver the securities that were short-sold shall pay
compensation determined by the Market.
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3. If the seller who has failed to deliver the securities fails to pay the compensation and fines,
the bank guaranty will be liquidated to the market maker or the seller broker in accordance
with the method procedures followed in the Market.
4. The Market must provide weekly reports to the Authority containing the value and volume of
short selling trades and the member participating in the Market.
5. The Market may impose the penalties prescribed for violations contained in its internal bylaws. The concerned parties may appeal against the decision of the Market within (30) days
from the date of notification thereof.
6. Short selling transactions executed through a broker shall be deducted from the allowed
trading volumes in light of the bank guaranty or other guaranties submitted.
Article (9)
Market Bylaws
The Market shall set the internal by-laws governing the procedures for short selling provided that
are approved by SCA.
Article (10)
Exempting Market Makers from Certain Provisions
Market makers shall be exempted from applying the provisions of articles Nos. (3/3), (4), (5/1, 3)
of these Regulations.
Article (11)
Arrangements Consistent with Islamic Law
These Regulations shall apply to any agreement or arrangement that is consistent with the
provisions of Islamic law and permits a person to sell securities that he does not own at the date
of sale.
Article (12)
Violations and Penalties
1. SCA may, at its own discretion or upon request from the concerned Market, initiate an
investigation in violations of short selling in any of the following circumstances:
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a. Breaching the provisions of the Law, or the regulations, decisions or instructions issued in
implementation thereof.
b. Departing from the standards of professional conduct.
2. If a violation is proved to have been committed, the Authority may impose one of the
following sanctions:
a. Give a warning to the violator and compel him to correct the violation within the period
specified by SCA.
b. Impose a fine of no more than the maximum limit provided for in the Law and the
regulations issued pursuant thereto.
c. Temporarily or permanently suspend short selling operations by the violator.
Article (13)
This Decision shall be published in the Official Gazette and shall come into effect from the next
day to the date of its publication.
Engineer Sultan Bin Saeed Al Mansouri
Chairman of the Board of Directors
Issued in Abu Dhabi on:12/8/2012.
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