DFM to implement buyer cash compensation for settlement



Dubai Financial Market (DFM) announced that it will implement the new procedures of Buyer Cash Settlement for trades as of May 5th 2013 onwards, pursuant to Resolution No. 44 of 2012 issued by the Securities and Commodities Authority of the UAE.

The Exchange has notified its clearing members of the new procedure on DVP settlement aimed to address the issue where securities are unavailable for delivery by DFM due to a rejection of a sell trade for settlement by the selling investor using local custodians for settlement. The new procedure means that a buying investor will be paid cash compensation in an unlikely event where securities are unavailable for delivery to the buying investor.

This procedure has been discussed with and approved by the exchange’s regulator, Securities and Commodities Authority (SCA). The DFM has conducted two briefing sessions for its custodians and brokers to explain various features of the procedure.

Essa Kazim, Managing Director and CEO, DFM said: “DFM has actively collaborated with the SCA and our clearing members to address any remarks expressed by the market participants and we have acted according to the international best practices to implement this new procedure. Buyer Cash Settlement is a common feature in global markets whereby cash settlement is applied in an unlikely event where shares are unavailable for delivery to resolve unauthorized sell trades. Under the new procedure, the selling investor using a local custodian for settlement will retain shares if the sell trade was rejected for settlement. Instead, DFM will pay the buying investor a cash compensation amount”.


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