Market Profiles

FII Market Entry Requirements for United Arab Emirates

RBC IS operates a segregated account structure in this market.

Please refer to 'Market Account Opening Requirements' for information on the market requirements. Clients are requested to refer to the requirements for information purposes only.

For further information or support around accessing this market, please contact your RBC IS representative.

Abu Dhabi Securities Exchange (ADX)
Operational out of Abu Dhabi (one of the seven emirates comprising UAE), the ADX was established on November 15, 2000 under local law as a legal entity of autonomous status, independent finance and management with necessary supervisory and executive powers to carry out the following functions:

• Provide opportunities to invest savings and funds in securities in order to benefit the national economy.
• Ensure the soundness and accuracy of transactions and to ensure the interaction between demand and supply in order to determine prices.
• Protect investors through establishment of fair and proper dealing principles.
• Impose stringent controls over securities transactions to ensure sound conduct.
• Develop investment awareness.
• Insure financial and economic stability and develop trading methods to ensure liquidity and stability of stock prices.

The ADX was established with an aim to lead the development of capital market in UAE by expanding into a cost effective and self regulated marketplace, in a lawful environment that ensures integrity, transparency and disclosure. The ADX's board of directors is comprised of nine members nominated by the Amiri decree. The members of the Board hold office for a term of three years.

The ADX is regulated by the Securities and Commodities Authority (SCA) that has been established under a Federal Law of the United Arab Emirates (UAE).

The ADX uses Equator and OMX X-Stream Horizon systems for market operations.

10:00AM - 3:00PM (Monday to Friday)

ISIN (International Securities Identification Numbering): Yes

Other: All listed securities traded on the exchange will have an assigned local security code.
However, the local custodian maintains the ISIN codes in internal systems to assist with STP, wherever applicable.

The Securities and Commodities Authority (SCA) - established in February 2000, SCA is responsible for developing the UAE capital market. The Federal Government appoints board members, and it acts as the regulator for both stock exchanges, the DFM and the ADX. The main objective of SCA is to supervise the various participants in the market and enforce their compliance with the laws, rules and regulations, and to ensure transparency in the working of the market to create the ideal investment environment, by monitoring all trading activities and changes in the market, and analysing movements and market information. In addition, they require listed companies and brokers to submit regular reporting and maintain compliance responsibilities.

ADX is a scripless market where registration takes place automatically via book-entry at the CSD. All securities are registered and held at the depository in the name of the beneficial owner.

For equities, the minimum price variation unit is AED 0.001.

ADX circuit breaker band for actively traded shares is +15%/-10% within one session. The price fluctuation band for less active stocks is +/- 5%. Additionally since November 2015, ADX has also introduced auction process in the circuit-breaker mechanism. In the new process, the financial instrument will enter a price auction for 5 minutes if the instrument price drops below 5 % and another auction for 10 minutes if the price proceeds to drop more than 9 % after the first auction.

AED

Not applicable.

With the implementation of DvP the following will apply to trading on the ADX:

• There will be a simultaneous transfer of securities and cash on trade date (T)+2 (DvP), which is the settlement date.
• A 'late confirmation' window will be provided within which a 'rejected' settlement may settle (subject to broker acceptance). This late confirmation period will begin on T+2 and end at 13:00 (local time) on T+4* (subject to exchange operational guidelines).
• Rejected sale trades will remain in 'pending out' status and will not arbitrarily move out of the investor's account on settlement date (as is the case currently), unless one of the following criteria is met:
  - trade settles in the 'late confirmation' window
  - a successful trade buy-in is done by the executing broker
  - market forces a buy-in (T+4)
  - due to illiquidity of the stock on the buy-in window, market forces the settlement of the original sale trade (proceeds will be received by local subcustodian, less applicable market charges/fees).
• There will be an introduction of a buy-in/sell-out process, with penalties (for failed settlements).
• Events relating to the buy-in session in the DvP settlement model and buyer cash compensation procedures will begin from 15:00 local time

*Please note that market charges/fees may apply to late settlement post T+2 and will be deducted from the sales proceeds by the market.

The following is a broad description of how settlement takes place:

The Abu Dhabi Securities Exchange (ADX) implemented Delivery versus Payment (DvP) settlement mechanism from May 29, 2011.

The need to set up and operate with a dual account structure is still a major concern to a number of international institutional investors and is incompatible with general emerging markets standards. International institutional investors often establish segregated custody and trading accounts in order to mitigate the risk from local brokers having unlimited access to the trading accounts. This results in the significant operational burdens of having to transfer shares from one account to the other prior to trade. Local brokers have 'execution access' to client's Agent Trading account, and brokers may sell assets without relevant instructions from clients.

The DvP model seeks to address these issues by enabling local custodians to reject purchase and sale trades which clients do not recognise (or have not sent matching instructions for). With the DVP model implemented, the Sub-Custodians have better control & protection over client assets and especially with added feature of "Buyer Cash Compensation (BCC) - a measure provided by the markets whereby sellers assets are protected, if he irrevocably rejects a sell trade, which they do not recognise & treat it as a bad trade.

The Abu Dhabi Securities Exchange (ADX) has issued updated operational guidelines on their DvP model. 

Details of the settlement flow - (as per RBC Investor Services' subcustodian) for foreign institutional investors (FIIs) are provided as follows: 

1. Direct / Turnaround purchase trade settlement - DFM / ADX obligation accepted by subcustodian

2. Direct / Turnaround purchase trade settlement - DFM / ADX obligation rejected by subcustodian

3. Direct / Turnaround sell trade settlement flow - DFM / ADX obligation accepted by subcustodian

4. Direct / Turnaraound sell trade settlement flow - DFM / ADX obligation rejected by subcustodian

5. Inter custodian turnaround trade settlement flow

Market Risks:

• Broker's exposure versus Bank Guarantee is reset daily (Potentially Brokers may be exposed to 200% of their Bank Guarantee).
• Execution of error trades on the Exchange by local brokers
• Ad-hoc Broker request for client information (subcustodian does not disclose client information (such as NIN & name) to Local/ International brokers).
• ADX - Sunday Settlement (No USD/ EUR- FX possible for same day value). Subcustodian will settle matched RVP trades on Sunday - overnight OD interest levied if there is insufficient balance in the account.
• Effective June 29, 2011, penalties will be levied on late settlement on T+3 and T+4.

In case of sale trades, investors need to move securities from the depository account to the trading account prior to the execution of trades in the market. The broker can execute a sell trade by using the client NIN number, but they cannot view the trading account of the client with the subcustodian and only has access to client trading account maintained by them. However with the implementation of DVP model, the Sub-Custodians have better control & protection over client assets and especially with added feature of "Buyer Cash Compensation (BCC) - a measure provided by the markets whereby seller's assets are protected, if he irrevocably rejects a sell trade, which they do not recognise & treat it as a bad trade.

Similarly, in case of purchase trades once the payment is done the securities are first received in investor's broker trading account and are automatically moved by DFM system to client's trading account under subcustodian. The brokers could execute a sale merely by putting an order to the DFM system and if the quantity matches, the shares will automatically move out. To mitigate this risk, it is suggested that investors move shares from the trading account to the CSD account maintained for each investor. Once shares are moved to CSD account no trades can be executed, until and unless the investor gives instruction to move the shares to the trading account. The subcustodian can support the setting up of standing instructions for the movement of shares to the CSD account for all purchases. However, it is mandatory for investors to provide a pre-sale advice prior to the execution of the sale trade on the exchange.

However, it is acknowledged that on or before SD+1 the bought securities in the trading account could be blocked due to a sale transaction executed by a local broker and hence subcustodian will not be able to move these securities into the investor registry account. It is also acknowledged that these blocked securities could be delivered out in settlement of the rejected sale transaction in cases where the DFM enforces cash close out for such rejected sale trade as part of their fails/ buy-in mechanism.

In September 2016, the SCA transferred some of its governance role to the local exchanges thus allowing the DFM and ADX  to set the required rules/procedures for certain activities including-  market making,  stock borrowing and lending and short selling, enabling the local exchanges to create a more vibrant market.

Within SCA’s new framework, the DFM and ADX have worked on updating the rules and procedures on introducing SLB and short selling. The Dubai Financial Market (DFM) exchange recently issued rules and general procedures for Securities Lending and Borrowing (SLB). Further, the Abu Dhabi Securities Exchange (ADX) implemented Technical Short Selling (TSS) service. 

Turnarounds trades are only allowed in ADX and the same has to be arranged by the local broker. Since May 2014, ADX amended trading practice to enable same day execution of matching orders (buy and sell) on the same NIN and security at the same price through same/ different brokers. This new practice applies to the following types of Investors: Direct Market Access (DMA), Funds, ETF issuers, Institutional Investors and Professional Investors.

ADX registered Brokers & Sub-custodians act as Clearing Agents through the ADX appointed Settlement Bank.

The central depository is part of the ADX and therefore is overseen and managed by the ADX.

BIS is an international organisation which fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. The Committee on Payments and Market Infrastructures (CPMI) uses three common structural approaches, or models, to categorise the links between delivery and payment in a securities settlement system.

The market uses near DvP settlement model process where both stock and cash settle on the same day - on Settlement date (T+2). The ownership in the shares moves on the settlement date, that is T+2.

All shares are registered and held at the ADX CSD department in scripless form and must be in the name of the beneficial owner.

Nominees and street names are not permitted in the United Arab Emirates.

The registration process is automated at the CSD on settlement of the trade.

The normal registration period is not applicable, as the transfer of ownership occurs simultaneously with settlement.

Share holdings may be required to be disclosed by the beneficial owner, particularly when holdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organisations for this market, within the timeframe required. If you have any questions regarding this issue we encourage you to consult your legal counsel. 

Failure to comply with reporting requirements may lead to penalties and/or other sanctions.

Foreign ownership limits are enforced and monitored by the ADX's market control section. The trading system will prevent the trade limit for a foreign investor to be breached. Therefore, no monitoring or foreign ownership is necessary by the investor or any other market participant. 

However, an investor is required to formally notify the SCA and the ADX when they:

• hold 5% or more of the shares of a listed company
• hold 10% or more of a parent, subsidiary, affiliated or allied company of a listed company
• intend to hold 20% of the shares of a listed company.

The official letter should be directed to the relevant department of the ADX and to the Disclosure Department of the Securities and Commodities Authority (SCA). The letter maybe delivered either as a hard copy [courier], fax, or e-mail as long as the confirmation of the receipt is done by the counterparty.

The full Articles 3, 4, 5, 6 and 7 of the SCA Rules and Regulations as to disclosure and transparency state as follows:

First: General Provisions - Article 3
Every natural person who owns, or who together with his minor children own, a percentage equivalent to 5% or more of the shares of a company listed in the Market shall immediately notify the market thereof. 

First: General Provisions - Article 4
Every juristic person who owns what amounts to 5% of the shares of a company listed in the market shall immediately notify the market thereof. 

First: General Provisions - Article 5
Every natural person who owns, or who together with his minor children own, and every juristic person which owns, a percentage equivalent to, or in excess of, 10% of the shares of a Parent, Subsidiary, Affiliate or Allied Company of the company listed in the market shall immediately notify the market thereof. 

General Provisions - Article 6 
Every natural or juristic person which owns a percentage equivalent to 10% or more of the shares of any company listed in the market, and desires to purchase 20% or more of such company's shares, shall notify the market before it places the purchase order for execution on the floor. The director general of the market may, after consultation with the Authority, prohibit the said operation if in his opinion prejudice to the interests of the national economy would ensue from it. 

General Provisions - Article 7 
A bank or financial institution carrying on banking business shall obtain the approval of the Central Bank of the United Arab Emirates before entering upon any transaction leading to its acquiring 5% or more of the shares of any company listed in the market. 

Additionally, the rules and regulations states that the issuer must disclose any names of those who own, or whose holding together with their minor children reaches, 5% or more of the company's shares, this obligation also to be complied with upon each occasion when the holding reaches 1% of the company's shares over and above the 5%(as per article 36).

As of June 13, 2012, The board members of the Securities and Commodities Authority (SCA) have approved amendments to two regulations, namely the Regulation for Disclosure and Transparency and the Regulation for Listing of securities and commodities. These amendments will come into force once notified in the gazette by the SCA. HSBC will inform clients through a follow-up broadcast once these amendments are effective. The amendments to the Disclosure and Transparency Regulation are as follows:

1. Every natural person and his/her minor children or every corporate body whose stakes and stakes of its affiliate group and/or its parent company and/or subsidiary company or its affiliate company, collectively, equal the following percentage must notify the market immediately as such:
   a) 5 per cent and above of the shares of the company listed on the market
   b) 10 per cent and above of the shares of the parent company, or subsidiary company, or affiliate company, or allied company of the company listed on the market
   Additionally, the company must disclose every (1%) increase or decrease off the beginning of disclosure limit outlined above.
2. Every natural person and his/her minor children or every corporate body owning shares in a company listed on the market, and wishing to acquire more shares to take his/its stake to (30%) or more of that company's shares, must immediately notify the market of their intent before offering the purchase order for execution on the trading floor. The market, after consultation with the SCA, shall withhold the purchase order if it has reason to believe that such a purchase may harm its interest or the national economy.

Article (17) of the Regulation for Listing of Securities has been amended as follows:
A chairperson, members of the board, general manager and any employee of a company which has listed its securities on the market, cannot transact, directly or through other person(s), any business in the company's securities unless they first disclose, through the market, the purchase/sale transaction, the quantity and prices of the securities and obtain the approval of the market manager for the transaction.
The aforementioned persons must disclose to the market any transaction in securities of the parent company, or the subsidiary company, or the affiliate company if those companies are listed on the market.

Buy-ins and Buyer Cash Compensation (BCC) procedures are applicable in the market with the DvP model implementation - details provided as follows:

Buy-in mechanism for rejected trades

Effective from trade date September 4, 2011, trades processed under the late confirmation window will be subject to the following penalties:

Additionally, the ADX will levy buy-in fees on new sellers selling shares / bonds to the buy-in bids as follows:

• Shares: buy-in fees are 0.00275% subject to a minimum of AED 65 and calculated as follows:
• Securities & Commodities Authority (SCA) fee - 0.0005% subject to a minimum of AED 5
• Market fee - 0.0005% subject to a minimum of AED 20
• Clearing, Depository & Settlement (CSD) fee - 0.0005% subject to a minimum of AED 10
• Brokerage - 0.00125% subject to a minimum of AED 30
• Order fee – AED 10 will be applied (if total trading commission is less than AED 65)

Bonds: buy in fees are 0.000275% subject to a minimum of AED 65 and calculated as follows:

• SCA fee - 0.0005% subject to a minimum of AED 5
• Market fee - 0.0005% subject to a minimum of AED 20
• CSD fee - 0.0005% subject to a minimum of AED 10
• Brokerage - 0.00125% subject to a minimum of AED 30

Order fee- AED 10 will be applied if total trading commission is less than AED 65)

Within SCA’s new framework, the DFM and ADX have worked on updating the rules and procedures on introducing SLB and short selling. The Dubai Financial Market (DFM) exchange recently issued rules and general procedures for Securities Lending and Borrowing (SLB). Further, the Abu Dhabi Securities Exchange (ADX) implemented Technical Short Selling (TSS) service. 

Presently there is no guarantee fund for investor protection in the UAE.

The key regulations and initiatives in this respect issued by the Central Bank of the UAE include, but are not limited to:

• Establishment of the Anti Money Laundering and Suspicious cases Unit (AMLSCU) in November 2000. This special unit was set up for investigating fraud and suspicious transactions in July 1998, and given the title of AMLSCU in November 2000.
• Regulation No. 24/2000 of 14/11/2000 regarding Procedures for Anti-Money Laundering. This is the key regulation which includes the definition of money laundering, scope, legislative aspects required by internal conventions and directives, requirements relating to identification of customers and to reporting suspicious financial transactions.
• Federal Law No. (4) for 2002, regarding criminalisation of money laundering This Law comprises articles which define money laundering, elements of a money laundering crime, actions which fall under a money laundering crime and the penalties imposed on violating this Law.

This is an FII market. Please contact your RBC Investor Services' Client Manager before making portfolio investments.

Effective June 1, 2021, new Commercial Companies Law allows full ownership by foreign investors of their onshore businesses, rather than the previous 49% limit and the requirement of an Emirati individual or Emirati company to hold the remaining 51%. The new law will not apply to companies that are wholly owned by federal, local governments, their subsidiaries, or those excluded based on a decision by the Cabinet.

Capital gains and income can be repatriated freely, provided that the transfers are made through a registered trading bank or an authorised foreign exchange dealer.

There are no currency restrictions in UAE and the local currency is freely convertible against most major currencies of the world and is pegged to the USD at a rate of AED 3.6725 (as at July 2008), which has the ability to move a few points up or down depending on availability of cash at the Central Bank on a specific date.

The settlement bank for the ADX is the National Bank of Abu Dhabi. All brokers and subcustodians are required to maintain accounts with the settlement bank(s) to facilitate ADX settlements. All cash settlements take place between 10:00 and 12:00 on T+2 in the settlement bank(s) books, where as shares would move in ADX between buyer and seller on T+2 from 08:00 to 10:00 on T+2.

From November 14, 2009, a new image based clearing system, ICCS, will be applied across UAE banks to ensure that all cheques received before 10:00 are cleared by 17:00, enabling same day credit into client accounts. All cheques received after the 10:00 cut-off time will be cleared on the next business day.

The Central Bank of the United Arab Emirates (UAE) introduced the mandatory use of the International Bank Account Number (IBAN), for all inward and outward remittances in UAE dirham (AED), effective from November 19, 2011.

As per Central Bank of UAE rules and regulations, overdrafts are not permitted on securities cash accounts.

The distribution of cash dividend handled by the CSD department of ADX based on the holdings in the CSD.

There is no concept of a fixed pay date and is not predefined by the company in the UAE market. However as the UAE companies law, a UAE incorporated listed company is required to pay the dividends to ADX agent banks, within a period and by using the process that are determined by ADX in coordination with the regulator, and the market must make the dividend payment within 30 days from the General Assembly resolution / Board of Directors decision to distribute such dividends.

The Issuer / Registrar forward the cheques to the registered holders on the pay date via ordinary mail. These cheques / bank orders can take between seven and 10 days to be received by the subcustodian. The company registrar issues cheques on pay date, however these are usually sent via ordinary post and can take between seven to ten days to be received. Dividend cheques received resulting from corporate events will be cleared and processed on same day basis, provided that the cheques are presented to the clearing bank before 10:00. The cleared funds are credited to investor's non-resident AED account. These funds can be freely remitted to an account overseas depending upon the client's instructions. Companies have the option to pay cash dividends directly into shareholders' cash accounts via wire transfers or cheques sent by registered post.

Companies do most dividend payments during March and April. There is no concept of a fixed pay date.

Dividends on equity are generally paid annually. Interest on corporate bonds is usually paid semi-annually.

Not applicable.

For ADX, market claims would be applicable due to late settlement window and entitlements would be paid directly by the company based on the settled positions / holdings in the CSD as of record date. The Impact of DvP on Corporate Actions is as follows:

• For rejected purchase trades, the corporate entitlements will be credited to the Client Rejection A/c with the executing broker (if applicable).
• Dividend - as Client Rejection A/c will be linked to subcustodian, it will receive the cheques and there will be a claims process from the local broker.
• The ADX will cash close out all outstanding buy-in transactions for consolidation, splits or bonus issue corporate events on the book close/ record date at the original traded price. Such cash closeout will be effected on outstanding quantities of rejected sales instead of the outstanding buy-in transactions.
• Even though a sale trade may be rejected by the subcustodian, the 'Pending sale' status under the Client's Agent Trading Account will remain in place till final resolution of securities settlement. As a result, the client will not receive the corporate action proceeds (if not entitled to as) and will have to claim the benefit from the local broker.

In the case of an error trade, the client will not receive the corporate action proceeds and will have to claim the benefit from the local broker. The Local broker must replace the securities sold in error plus any relevant corporate action due to the client.

Entitlements are based on the settled position as at the close of trading on the record date. Currently Rights are not tradable. CDS as of record date.

There are no additional documents required for proxy voting except for the Power of Attorney given at the time of opening the account.

Intention to vote by proxy must be registered with companies at least 24 hours prior to the annual/extraordinary general meeting, but clients are required to provide instructions within sub-custodian deadlines. Entitlement of voting is ascertained from the Clearing, Settlement and Depository System (CSD) and the company's registrar. The CSD report indicates the beneficial owner and there is no Nominee concept in the market. Individual foreign investors are only allowed to hold up to 5% of the total holdings of any company listed in the stock market and they are entitled to vote for their entire holdings (i.e. maximum 5%). However, as per the Companies Law, an authorised representative of the investor must not hold more than 5% of the company capital.

Trading is suspended if an AGM is in session during the trading hours. The particular shares of the company would not be traded up until the end of the AGM. However, if the AGM is held after trading hours, the shares would be traded at the ADX as on a normal trading day.

The agendas are required to be provided in a meeting announcement and they are generally available in Arabic and thus require translation into English by the subcustodian.

Voting results will be reported on the next day after the meeting date. The results are published on the ADX website and in local newspapers.

The listed companies are required to make disclosures in regular intervals as per SCA rules and regulations.

However, ADX doesn't publish all reports of all listed companies, please see the below link for more details on the financial reports of the listed companies, published by ADX and most of it in Arabic:

http://www.adx.ae/English/Securities/Pages/FinancialReportsSearch.aspx

A duly notarised two tier Power of attorney (PoA) is required. This is submitted to the Abu Dhabi Securities Exchange (ADX) with a copy of the custody agreement.

There is no additional document required for proxy voting. The POA provided at the point of account opening is sufficient.

Not applicable. Currently, there are no taxes levied on foreign investors on their securities investments in the UAE.

Not applicable

Not applicable

Not applicable

Not applicable

5% value added tax (VAT) is applicable on the trading fees (collected by the respective Clearing, Settlement and Depository [CSD] division) for all executed trades.

UAE - Abu Dhabi Holiday Calendar

• Abu Dhabi Securities Exchange   www.adx.ae
• Securities and Commodities Authority   www.sca.gov.ae
• Dubai Financial Market   www.dfm.ae
• UAE Central Bank www.centralbank.ae