Abu Dhabi Securities Exchange (Essay Sample)

Abu Dhabi Securities Exchange
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Abu Dhabi Securities Exchange
The Abu Dhabi Securities Exchange (ADX) is a stock market that was established in 2000. It was formed for the purpose of trading the shares of companies based in the United Arab Emirates. The exchange market has trading locations in such areas as Abu Dhabi, Al Ain, Sharjah, and Fujairah. The stock exchange was initially known as Abu Dhabi Securities Market (ADSM) (Abu Dhabi Securities Exchange, 2015).
It experienced a decline in trading activities during a particular period. This period lasted between 2005 and mid-2006. During the same period, the trading index of ASDM fell by more than 30% within the first six months of the noticeable decrease (Abu Dhabi Securities Exchange, 2015).
In the Abu Dhabi Securities Exchange market, companies are listed according to the sectors in which they operate. These industries include the banking sector, the insurance sector, service sector, and the industry and hotels sectors.
The financial market management requires a regulatory authority in order to protect the buyers and sellers in such a busy market. In the United Arab Emirates, the regulatory body in charge of managing the trade in the exchange market is known as the Securities and Commodities Authority (SCA).
The Securities and Commodities Authority has a vision to develop the capital market and contribute to the national economy. It also has an obligation to protect investors by encouraging sound financial practices. Its values are based on fairness and equity, partnership and co-operation, transparency and creativity in ensuring innovation and excellence in the capital market.
The regulatory authority also seeks to ensure a stable environment that will attract investors in addition to entrenching the principles of good practices among industry players. Finally, it seeks to develop a system that recognizes quality, transparency and ensures efficiency.
There are various laws that govern the operations in terms of the trading of securities and other financial instruments such as swaps, options, futures, and forward contracts. These rules and regulations are set to ensure that traders are protected from unscrupulous businessmen and middlemen (Report: Abu Dhabi 2013, 2013).
Since the industry has many players, brokerage firms are licenced by the regulatory authority to act as intermediaries. However, a broker has to meet certain requirements before being awarded a licence to operate. Some of them are such as meeting the requirements of financial muscle, its legality of operation, and finally, virtues such as integrity (Report Abu Dhabi 2013, 2013).
Companies strive to be listed in the capital markets for various reasons. However, the main reason for listing is usually expansion purposes. That is, companies aspire to increase their net worth by raising funds from the public. Raising of funds is usually made through the issue of securities by a company. Not all the companies can be listed though as certain conditions have to be met (Securities and Commodities Authority, 2015).
The process of listing involves application to the United Arab Emirates’ Securities and Commodities Authority. For this, a company needs its capital structure to be aligned with the SCA requirements. It must prove that it has a stable financial structure and as su...