The Qatar Stock Exchange (QSE) may soon allow omnibus accounts for custodians as part of its efforts to enhance the attractiveness; it also indicates the advent of derivatives.
"Omnibus account (has been) approved by the QFMA (Qatar Financial Market Authority)," QSE chief executive Rashid bin Ali al-Mansoori said in a recent tweet.
The Omnibus is used with custodians to facilities more investors in one account and make it efficient to place orders.
The QFMA board had in 2018 approved the issuance of rules and procedures for omnibus orders. Such rules and procedures govern the creation of omnibus accounts, through which the orders of a group of clients, whose accounts are associated with one order, are executed. After trading, shares purchased or sold are allocated to each client's own account.
The issuance of such rules and procedures comes as part of the QFMA's efforts to increase the attractiveness of the Qatari capital market for both domestic and foreign investors by giving them the opportunity in providing diversified financial services suitable to the market needs and facilitating the task of local and international investment managers on the QSE.
As per QFMA stipulations, there would be an allocation account and associated account (s). The allocation account is created on the depository systems in the investment entity’ name and used to enter omnibus orders of securities’ sale and purchase for the clients having the associated accounts as one order through the financial services company.
Market sources are of the view that one of the advantages of omnibus accounts is that it would reduce costs as only one account is required for many investors, and also ease the burden for issuers.
An omnibus account is normally overseen by a futures manager, who uses the funds in the account to complete trades on behalf of the participating individual investors.
In the Capital Market Report 2020, the Qatar Financial Centre had suggested creating a derivatives market, initially offering single-stock futures contracts, as part of the key recommendations for the country's capital market development.
The QSE has chalked out plans to launch derivatives as part of enhancing the investment portfolio for investors, and also to make it eligible to achieve higher international classification compared with the present emerging market status.
The report had suggested creating a derivatives market, initially offering single-stock futures contracts, as part of the key recommendations for the country’s capital market development.
A derivatives market would add to the breadth of Qatar's capital market, offering investors risk management tools to hedge their investments and business exposure.
The QSE had recently announced that it is looking into derivatives trading, indicating that it could be hosted on the exchange, supported by a listing framework and clearing and settlement through the Qatar Central Securities Depository.
In 2017, the Arab Federation of Exchanges' affiliated members reached out to 33 financial institutions which lead it to create the financial institutions committee as well as several working committees treating subjects such as omnibus accounts, whose structure is being evolved in the Gulf Co-operation Council.