Market Surveillance & Manipulation Flashcards

What is 'short selling' and how is it regulated in the UAE?

Answer: Selling securities you do not own, with the aim of buying them back at a lower price; regulated by the SCA with strict rules

Short selling involves selling securities not currently owned, expecting to profit from a price decline by buying them back cheaper. The SCA regulates short selling with rules on covered vs. naked short selling, disclosure, and conditions to prevent abusive practices.

What is 'cornering the market'?

Answer: Acquiring sufficient control of a security or commodity to manipulate its price by controlling supply

Cornering the market means gaining monopolistic control over a security or commodity so that one party can dictate prices. It is a serious form of market manipulation prohibited under UAE securities law.

What is the SCA's approach to cross-market manipulation?

Answer: It cooperates with other regulators domestically and internationally to address manipulation that spans multiple markets or jurisdictions

The SCA cooperates with other UAE regulators (Central Bank, Insurance Authority) and international organizations (IOSCO members) to address market manipulation that may involve multiple markets or cross-border activities.

What obligation do licensed brokers have regarding suspicious trading activity?

Answer: Brokers must report suspicious trading activity to the SCA and relevant authorities

Licensed brokers have a mandatory obligation to report suspicious trading activity that may constitute market manipulation or other violations to the SCA. This surveillance obligation is a key part of market integrity.

What is the consequence of market manipulation on investor confidence?

Answer: It undermines investor confidence and damages market integrity, reducing participation and market efficiency

Market manipulation undermines investor confidence by creating unfair markets where prices do not reflect genuine supply and demand. This damages market integrity, deters investment, reduces liquidity, and harms overall economic development.

What is 'price stabilization' and when is it permitted under UAE law?

Answer: It is the practice of supporting a newly issued security's price in the aftermarket, permitted under strict SCA rules for a limited period post-IPO

Price stabilization involves supporting the market price of a newly issued security shortly after an IPO to prevent an initial sharp price decline. The SCA permits this under strict conditions, including disclosure, time limits, and price limits.