The Dubai Financial Market (DFM) rolled out a centralized securities lending and borrowing (SLB) program, according to a press release (pdf). The program replaces an older system which saw transactions take place bilaterally between participating institutions including clients, borrowers, lending agents, and brokerage firms.

The program will initially be limited to institutional investors, before expanding to retail demand at a later stage. SLB will be operated by Dubai Clear, the bourse’s wholly-owned central counterparty.

How it works: The new system enables investors to lend eligible securities, while borrowers including hedge funds and market makers use them for trading and liquidity strategies. Transactions are matched centrally and settled anonymously through Dubai Clear as the central counterparty, with the implementation of risk controls including margining and collateral management to minimize counterparty and operational risks.

The rationale: The move aims to help broaden DFM’s investor base and ramp up market liquidity, while aligning with international best practices, said Hamed Ali, CEO of DFM and Nasdaq Dubai.

ICYMI- Last year, xCube launched the country’s first fully automated SLB service for retail investors here at home. The platform enables retail investors on the DFM to access their stocks, hedge their portfolios and lend their securities to other investors in exchange for a fee. Investment banks and brokerages including Arqaam Capital offer similar services on the ADX.

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