CmaBoardReleases
Title: Press Release: The Market Development Program Enters Comprehensive Market Testing
Kuwait – April 24, 2024 – As part of the Capital Markets Authority’s efforts to implement one of its key strategic directions, which involves the application of the “Market Development Program,” the CMA, in cooperation with all market participants to carry out comprehensive market tests within the framework of the Market Development Program. The twenty-third comprehensive market test was completed during the period from March 10 to 17, 2024. The twenty-fourth comprehensive market test is currently underway.
The Central Bank of Kuwait graciously provided a testing environment for the Kuwait Automated System for Settlement of Interbank Payments (KASSIP) among the participants within these tests, serving as the responsible entity for the operation and oversight of this system. It is worth noting that Kuwait Clearing Company had recently joined this system after fulfilling all its technical requirements.
Technical tests commenced in the second half of 2021, previously limited to a specific outputs. Twenty-two technical tests were executed for each output individually with the concerned parties, leading to the comprehensive market test No. 23. For example, the ability of financial brokerage companies to perform clearing tasks - including net asset value calculations - was tested in separate technical tests from other outputs. Conversely, the technical systems were separately tested with portfolio managers to ensure that market participants' ability to apply the sub-accounting mechanism, which automatically identifies beneficial owner of the investment portfolio account or electronic trading account for supervisory purposes.
In this regard, it is important to note that the second phase outputs of the market development program are diverse and essential. Among the key achievements are the establishment of the Central Counter Party (CCP), upgrading the work of financial brokerage companies to the qualified broker model, and completing cash settlement through settlement banks and the KASSIP system. Several commercial banks also participate in these tests, due to their willingness to provide their services as settlement banks for qualified brokerage firms.
After concluding the previous twenty-two comprehensive market tests, all outputs were integrated for the twenty-third comprehensive market test. The comprehensive market tests seek to simulate the post-trading system to ensure the readiness of the technical systems and administrative procedures of all participants involved in varying capacities according to the nature of these entities.
Prior to commencing the twenty-third comprehensive market test, the KCC, with the participation of the CMA, held four workshops to present the plan and scope of the comprehensive market tests on March 4-5, 2024.
Six local banks, ten brokerage companies registered on the Boursa Kuwait Securities Exchange, twenty-six companies licensed to practice the activity of a local investment portfolio manager, and four entities licensed to practice the activity of a custodian, Kuwait Clearing Company and Boursa Kuwait Securities Exchange Company, participated in this test, in addition to the (SMARTS) supervision system at CMA, and the role of the Central Bank of Kuwait is to monitor those operations that were implemented during the testing period.
The twenty-third comprehensive market test revealed some expected observations related to the cash settlement, which will take place through the settlement bank systems and Kuwait Automated System for Settlement of Interbank Payments (KASSIP). The occurrence of such observations is typical and expected, given the nature of the change, the number of participating parties, and the overlap of procedures among them, in addition to the size and type of outputs in the second part of the third stage.
As part of following up on the test results and addressing the participants’ comments and errors, and in preparation for the twenty-fourth comprehensive market test, individual meetings were held with each financial brokerage company in the attendance of the selected settlement bank, in addition to the custodians, during the period from March 24 to April 3. During these meetings, the technical requirements for twenty-fourth comprehensive market test - which is being implemented during the period from April 21 to 28 - were clarified, and participants were confirmed on the need to fulfill these requirements within the time plan specified by the work teams at the CMA and the KCC.
In all cases, the CMA and the KCC control all participating entities and ensure the market’s readiness by following up weekly reports on the preparations of those entities to participate in the expanded market tests, in addition to field visits by the CMA and the KCC to the participants’ headquarters to follow up on the progress of these tests, in particular to financial brokerage companies and custodians.
In conclusion, the CMA, in cooperation with its strategic partners, continuously seeks to implement its strategic plans and projects that will achieve the strategic objectives, which include developing the financial markets and raising the efficiency of companies operating in the financial market in the State of Kuwait.
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Notes to Editors:
The Capital Markets Authority was established pursuant to Law No. 7/2010, approved by the Kuwaiti Parliament in February 2010. Pursuant to the Law, the CMA shall regulate and supervise the securities activities, achieve transparency and fairness, observe listed companies’ execution of Corporate Governance regulations, and protect investors from unfair practices which violate the CMA's Law.
Furthermore, the Law's provisions stipulate the supervision of mergers, acquisitions, and disclosure operations. The CMA also aims to provide awareness programs related to securities activities.
For further information, please contact:
Public Relations & Media Office
Tel: 22903062
Fax: 22903505
Email: pr-media@cma.gov.kw