Bahrain Bourse (BHB), with the approval of the Central Bank of Bahrain (CBB), has launched Technical (Uncovered) Short Selling Guidelines aimed at increasing market liquidity and diversifying investment and hedging instruments. These guidelines are designed to attract new investors and are available to market participants through authorised brokerage firms.
The new guidelines supplement the existing Market Rules of Bahrain Bourse, regulating ‘Technical (Uncovered) Short Selling,’ where the seller does not possess the securities at the time of sale or has not arranged for their borrowing but commits to settling within the T+2 settlement period. ‘Technical (Uncovered) Short Selling’ is restricted to authorised brokers and qualified investors.
The framework includes measures to regulate short-selling, such as suspending trades if a stock’s reference price drops by a minimum of 5% or if short-sold securities reach 10% of the total capital issued. Bahrain Bourse has established a clear framework for executing these trades.
“The guidelines are part of our strategic efforts to enhance market liquidity and align with the Financial Services Sector Strategy,” stated Shaikh Khalifa bin Ebrahim Al Khalifa, CEO of Bahrain Bourse. “They aim to regulate ‘Technical (Uncovered) Short Selling’ in line with international best practices, promoting market efficiency, transparency and pricing efficiency.”
“Establishing a robust regulatory framework for Technical (Uncovered) Short Selling, including clear rights and obligations for brokers and qualified investors, empowers investors to utilise new trading strategies and diversify their portfolios.,” he added.
Eligible Members must be authorised by BHB to conduct Technical (Uncovered) Short Selling activities as per the guidelines. The practice applies to eligible securities approved by BHB and is subject to regular review to ensure a secure and adaptable market environment.