DFM Introduces Omnibus Accounts To Enhance Market Access

The Government of Dubai is devising a strategy to develop its capital markets. The objective of these strategies is to improve the accessibility of international financial markets.

In an endeavor to promote investment, the Dubai Financial Market is working in collaboration with the Ministry of Finance to launch the Omnibus Accounts for investors.

These accounts would enable the investors to hold their securities safely and use them for exploring the diversified investment markets. This facility could be operated only by eligible investors as notified by the regulators.

According to Hamed Ali, who is the Chief Executive Officer of the Dubai Financial Market, these Omnibus Accounts constitute a milestone to enhance the confidence and trust of international investors in domestic instruments.

These accounts comply with the market requirements and justify the criteria of the international index providers. The regulators are now developing a regulatory framework for operating these accounts. It is only through these accounts that certain market participants such as asset management companies could achieve operational excellence and cost efficiencies. 

The Omnibus Accounts increase the feasibility to invest in the markets

The Omnibus Account is a kind of unified account. It allows the investors to hold and trade the securities on the behalf of multiple beneficial owners of the securities. It has a unique single investor number which differentiates the investment of one investor from the other. Investors would enjoy the liberty to invest in multiple securities at the same time.

This account would enable the investors to pool their local and international assets and reap gains out of the same. These accounts have been prevalent in the countries of the United States of America and the United Kingdom so far.

According to the statistics, these kinds of accounts have encouraged international investments and doubled in the last four years. 

In the meantime, the Dubai Central Securities Depository, which is a wholly-owned subsidiary of the Dubai Financial Market, has issued the Omnibus Account Rules. These rules provide comprehensive information about the implementation of this scheme.

The rules specify given criteria to identify the eligible investors. They also enumerate the maximum permissible quantity to trade in domestic and international securities. They rely on the MSCI Market Accessibility Criteria and hence provide a lock-in period to hold the investments to avoid speculations in the valuation of the currencies.

These accounts have proved to be beneficial to reduce market volatility. This development ensures that the United Arab Emirates grows at par with the International economies and does not lag. 

According to Hanseen Al Hammadi, who is the general manager of the Dubai Central Securities Depository, this move is likely to develop the market infrastructure of Dubai. It has been the duty and the objective of the depository in Dubai to develop such market instruments that strengthen the fundamentals of the economy.

The concept of Omnibus Accounts is likely to boost the infrastructure of the UAE. It will motivate local investors to participate in the trade of the instruments.

With the increase in investor participation, profitability, and short-term gains are likely to increase. With this, the gross domestic product of the economy will multiply exponentially. All of these efforts aim to make the UAE the most potent destination for foreign investment. 

Omnibus Accounts are compatible with almost all currencies. These accounts align with the already operational dematerialized accounts of the investors and do not impose any additional charges on them.

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According to the latest directive of the Depositories, the investors can switch to either of these accounts as both of them are responsive to accept the trade. The new rules concerning these Omnibus accounts would be operational from March 29, 2023.

Once these rules are operationalized, they will enable the investors to start trading. The Dubai Financial Market has also set up an advisory center to take up all the complaints and address the grievances of the investors. The investors will be able to solve the issue in the minimum amount of time. 

However, the rules which have been formulated so far, are not compulsory and other financial entities such as brokers have the liberty to amend these regulations according to their own convenience. They may introduce certain amendments but at the same time, they do not have the right to transgress from the given framework in totality.

However, they can change the procedure and establish their grievance redressal machinery. All of this aims to increase the ease of transacting financial instruments. Investors will gain from these trends in the times to come. Such moves have been taken in furtherance of the long-term financial goals of the country.