- The technical regulations and trading mechanisms of the UAE financial markets do not permit, or support, short-selling practices up to this point, unless done in accordance with the SCA Board Decision No. (48) concerning the Regulations as to Short-Selling of Securities.
- SCA has not issued approvals to any local bodies to practice short-selling.
Hence, any short-selling practices are considered a clear violation of SCA regulations and legislations and violators would be subject to appropriate legal actions.
It is worth mentioning that the SCA Board Decision No. (48) concerning the Regulations as to Short-Selling of Securities defined short-selling as "the sale of borrowed securities or securities not owned by the seller" and reserved the practice for market makers, in addition to other cases approved by SCA.
To clarify, the concept of short-selling is the selling of borrowed securities in the hope of repurchasing them in the future at a lower price and returning them back to the lender at settlement date, or the selling of securities not owned by the seller, buying them back from the market—by delivery date—and delivering them to the buyer, or borrowing them from another and delivering them to the buyer and then purchasing them for the lender. By doing so, sellers aim to extract a higher profit margin from the difference in the purchase price and the selling price as they expect a drop in the price of shares after the selling, and subsequently repurchase them for less than the selling price. However, if the price of shares in question surge (unlike expected), sellers would incur losses.
Given the above, SCA reiterates that regulated short-selling practices are only reserved for market makers. It urges the public not to hesitate to report any illegal short-selling of securities, so that it investigates violations and takes appropriate actions against violators in accordance with SCA rules and regulations.