CISI UAE FRR Investment Products and Markets — Questions and Answers
Question 1: What are the two main stock exchanges operating in the UAE?
- Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) (Correct answer)
- NASDAQ Dubai and Bahrain Bourse
- Kuwait Stock Exchange and Muscat Securities Market
- DFM and London Stock Exchange
Correct answer: Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM)
The Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) are the two primary stock exchanges in the UAE, both regulated by the SCA.
Question 2: What is a sukuk in Islamic finance as practiced in the UAE?
- A conventional interest-bearing bond
- An Islamic financial certificate similar to a bond but compliant with Sharia law (Correct answer)
- A type of insurance product
- A derivative instrument
Correct answer: An Islamic financial certificate similar to a bond but compliant with Sharia law
Sukuk are Islamic financial certificates that represent ownership in an underlying asset or project, providing returns without charging interest, making them Sharia-compliant alternatives to bonds.
Question 3: Which of the following is a feature of the UAE's Delivery Versus Payment (DVP) settlement system?
- Payment is made 30 days after delivery
- Securities and payment are exchanged simultaneously to reduce settlement risk (Correct answer)
- Only applicable to government bonds
- Settlement occurs only in US dollars
Correct answer: Securities and payment are exchanged simultaneously to reduce settlement risk
DVP ensures that the transfer of securities occurs only when payment is made simultaneously, minimizing counterparty risk in securities transactions on UAE exchanges.
Question 4: What is the T+2 settlement cycle used in UAE stock exchanges?
- Trades must be reversed within 2 hours
- Settlement of trades occurs two business days after the trade date (Correct answer)
- Traders have 2 minutes to confirm orders
- Taxes are applied 2 days after trading
Correct answer: Settlement of trades occurs two business days after the trade date
T+2 means that the settlement of a securities trade (delivery of shares and payment) occurs two business days after the trade execution date on UAE exchanges.
Question 5: What is the primary purpose of the Emirates Securities and Commodities Authority's (SCA) disclosure requirements?
- To increase government tax revenue
- To ensure transparency and protect investors through timely disclosure of material information (Correct answer)
- To limit the number of listed companies
- To control stock prices
Correct answer: To ensure transparency and protect investors through timely disclosure of material information
SCA disclosure requirements mandate that listed companies provide timely, accurate, and complete information to the market, ensuring transparency and protecting investor interests.
Question 6: What is a Real Estate Investment Trust (REIT) as regulated in the UAE?
- A private real estate development company
- A publicly traded fund that owns and operates income-generating real estate (Correct answer)
- A government housing scheme
- A type of mortgage product
Correct answer: A publicly traded fund that owns and operates income-generating real estate
REITs in the UAE are SCA-regulated investment vehicles that pool investor funds to own and manage income-generating real estate properties, distributing most income as dividends.
CISI UAE FRR Investment Products and Markets
What are the two main stock exchanges operating in the UAE?