CmaBoardReleases
Title: Circular No. (3) of 2018 Regarding the Liquidity Guidelines for Licensed Persons to Practice the Activity of Securities Broker Registered with an Exchange
Mr. Chairman of the Board of Directors
Greetings,
As part of the Capital Markets Authority’s responsibility to regulate securities activities and ensure compliance with the applicable laws and regulations, and in reference to the provisions of Article (63) of Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority and the Regulating Securities Activities and its amendments, regarding the Authority’s role in setting the standards of the securities activity and the provisions of Article 2-1-4 of Chapter Two of Module Five (Securities Activities and Registered Persons) of the Executive Bylaws of the same Law "The Authority may require a Licensed Person to submit periodic reports on their work in accordance with each type of activity, ...... " the Authority has decided to apply the liquidity standards of a securities broker registered with an Exchange, as follows:
(1) The cash and cash equivalents ratio shall not be less than (15%) of the company’s average daily trades for the month, and shall be calculated on the consolidated basis (the parent company and its subsidiaries).
Control Limit%: (cash and cash equivalents / average daily trades for the month)
- The definitions of the calculation elements of the average are as follows:
Numerator - Balance of cash and cash equivalents:
The amount of cash on hand and balances with the Central Bank of Kuwait, other banks and financial institutions, along with short-term highly liquid investments that are readily convertible to known amounts of cash which are subject to an insignificant risk of changes in value, and has short maturity of three months or less from the date of acquisition.
Denominator – The company’s average daily trades for the month:
It is the calculation of the simplified average trading volume of the total value of day-to-day sales and purchases during the month (not including transactions with a specific regulation of the Exchange rules).
2) The brokerage company shall prepare a statement of the value of cash and cash equivalents to the average trading of the company according to the form attached in this circular, and to be provided to the Authority on a monthly basis and by an official letter approved by the executive director or the financial manager of the company or their representative, sent to icd@cma.gov.kw as of 28/02/2018, taking into consideration that the table will be sent within 10 business days after the end of the financial period.
3) The company should develop its business models in accordance with its conditions and capabilities, and to meet the liquidity standard. If the balance of cash and cash equivalents decreases to the average of the company's trading from the minimum stipulated, the company prepares and submit a report to the Authority within two working days with the reasons for the decline and the actions that will be taken or taken by the company in order to reach the minimum liquidity standard again.
4) Non-liquidity compliant financial brokerage companies should work towards complying with the liquidity standard and take into account that the deadline for full compliance with the Liquidity Standard will end on 30/06/2018. Required measures will be taken regarding the companies that do not show gradual improvement in this regard.
Accordingly, the brokerage companies must comply with the requirements of the liquidity standards from the date of issuance of this circular until full compliance is achieved on 30/06/2018.
For any inquiries please call the following numbers:
22903184, 22903179
Mishal M. Al Usaimi
Issued on 27/2/2018