"With effect from Monday, 25/03/2024 as trade date, it will apply the reduction of settlement cycle from T+3 to T+2," said the Qatar Stock Exchange (QSE), quoting Edaa.
This strategic move focuses on shortening the settlement period at the QSE and complements the Qatar financial market development initiatives. The endeavour is to follow the best international practices in the global financial markets to provide the best ways and functions to enhance the efficiency of Qatar’s securities market, it said.
The settlement cycle has remained at trade date plus three business days (T+3) in Qatar, where the global fund managers have been eyeing the fastest growing economy due to its strong macro fundamentals and its hydrocarbons expansion strategy.
Qatar's medium-term growth is expected to average around 5.5%, boosted by significant LNG production expansion and the initial reform gains from implementing the third National Development Strategy, according to the International Monetary Fund’s latest Article IV consultation with the country.
The shortened settlement cycle also assumes significance especially after Doha unveiled its plans to enhance its liquefied natural gas production to 142mn tonnes per year before the end of 2030 from the current 77mn tonnes, which in turn offers direct and indirect benefits to the private sector as well.
The ‘T+2’ settlement cycle ensures seamless international fund management, which helps in enhancing the competitive edge of the Qatari capital market, market sources said.
A key industry demand has been to shorten the settlement cycle in view of Qatar having the necessary enablers such as the market ecosystem and technological infrastructure.
A cost-benefit analysis of the shortened settlement cycle has found that major bourses across the world favour shortened settlement period as it helps reduce clearing and settlement risk as well as the overall costs for the securities' industry, thus making the market safer.
The significant improvements in straight through processing and the underlying technology over the last few years call for a shortened settlement cycle, which at this point of time greatly improves volume and liquidity in the system, market experts said.
Having ‘T+2’ settlement cycle, in line with global markets, ensures seamless international fund management, which in turn, helps in enhancing the competitive edge of the Qatari capital market, sources said.
The shortened settlement cycle would help improve market efficiency as the reinvestment becomes faster, they said, adding the reduction in the initial margins and the shortened settlement cycle are ought to improve the liquidity.