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Oman’s bourse to introduce short selling, securities lending

Capital market transformation: Raft of measures to enhance MSX’s appeal to new market makers and thereby boost liquidity: CEO
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The Capital Market Authority (CMA) is preparing to authorise the use of ‘short selling’ for the first time in the Sultanate of Oman – one of a raft of initiatives aimed at attracting new market makers as well as boosting liquidity in the nation’s capital market.

Commonly practised in bourses around the world, but hitherto barred in the Sultanate of Oman, short selling is an investment or trading strategy that speculates on the decline in a stock or other security's price. Typically, investors sell stocks they have borrowed from a lender on the expectation the price will drop. The hope is to rebuy and replace the stocks they borrowed at a lower price. The difference between the price they sell the stock at, and the price they buy back the stock at, is the profit, say experts.

According to Haitham bin Salim al Salmi, CEO of Muscat Stock Exchange (MSX), plans for the authorisation of short selling will be announced soon as part of efforts to enhance the appeal of the Omani capital market to new market makers.

Speaking at an online forum recently, he said short selling will be enabled alongside the introduction of ‘Securities Lending and Borrowing’ (SLB), a mechanism through which investors can borrow or lend shares to other market participants. Borrowers in SLB are usually short-sellers.

Haitham bin Salim al Salmi, CEO of Muscat Stock Exchange (MSX)
Haitham bin Salim al Salmi, CEO of Muscat Stock Exchange (MSX)

“To introduce market makers, we need to introduce Security Lending & Borrowing (SLB) and Short Selling. (Both) are there in our amendments that will be issued within a month, but haven’t been announced yet. Our systems our ready to enable short-selling services and SLB; if we need market makers, they cannot perform without short selling and SLB,” Al Salmi stated

In recent months, the MSX has unveiled a series of measures and initiatives to help strengthen its positioning as an Emerging Market bourse. Besides reinforcing its role in national economic development, MSX is also undergoing a major transformation ahead of its strategy to go public at the end of around five years.

MSX, together with the regulator, are currently exploring ways to attract market makers in increasing numbers to the Omani capital market, said Al Salmi.

“We want market makers; we are creating incentives for market makers to come and operate in Oman,” he stated, adding that the Authority is currently reviewing “3 to 4” market maker applications. “You’ll hear from us soon when we launch the first market maker is appointed, and following that liquidity provider funds (will be announced),” he added.


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