In 2016 Boursa Kuwait, the new operator of the Kuwait Stock Exchange (KSE), set about implementing its long list of regulatory improvements that will align the country’s stock market with the most advanced in the region. This process is continuing in 2017, with every month seeing announcements regarding new products and services aimed at improving the regulatory framework, boosting liquidity and attracting foreign investment.
Given the scale and speed of reform, the mechanism by which it is undertaken has itself become a matter of interest for market participants. While the enhancements proposed for the exchange have been welcomed by the investment community as necessary, the manner of their introduction is crucial. To investors, brokers and listed companies, foreknowledge of market changes is rated highly, as is participation on forming the details.
Encouragingly, Boursa Kuwait has shown a willingness to work transparently with stakeholders as it sets about implementing its programme of reform. One of its first measures has been to significantly enhance the availability of data concerning trading activity, which has hitherto been patchy. In July 2016 it revealed that it had entered into a long-term partnership with information provider Thomson Reuters to offer an upgraded financial data service on the KSE’s new website. The new platform includes quarterly and annual updates of e-income statements, balance sheets, cash flow statements and financial ratios, as well as daily updates on a number of ratios according to closing price. In a second phase of implementation, the partnership will offer more enhancements to the data service, such as charts and comparability capabilities. This follows a trend across the region by which exchanges are equipping their websites with charting capability previously offered only by brokers and proprietary software suites.
The much improved exchange visibility resulting from the Thomson Reuters partnership is a significant advancement. Just as importantly, Boursa Kuwait has applied the theme of transparency to its implementation of new exchange processes. One of the most keenly anticipated innovations introduced in 2016 was the market-making model, by which companies are able to facilitate trading in a specified stock by acting as a middleman; that is, holding a stock and offering both buy and sell quotations.
Crucially, the new framework was only introduced after consultation with stakeholders. The Market-Maker Rulebook draft was uploaded onto the KSE website in October 2016, with feedback collated and analysed later in the month. At the time, Khaled Abdulrazzaq Al Khaled, vice-chairman and CEO of Boursa Kuwait, stressed the importance of its transparent approach. He told OBG, “The launch of the Market-Maker Rulebook draft is a significant step towards improving market performance. By sharing this with our stakeholders, we are gauging the degree to which this draft addresses market needs, and more importantly, allowing space for improvement. This is an ideal process that will allow us to introduce a series of successful tools and solutions in the short and long term, and ensure that transparency is at the core of all our operations.”
This model of widespread consultation and refinement has been repeated with the significant exchange innovations that have followed. In February 2017 Boursa Kuwait announced the conclusion of its market-wide public consultation on the trading rules draft, which again was posted on the firm’s website to enable stakeholders to assess and respond to it. The following month, the public consultation for the Over-the-Counter Trading Rulebook came to an end.
After a Boursa Kuwait team reviewed feedback from investors and mediators, specific areas of the proposed rules were altered before the draft was shared with the Capital Markets Authority for final approval. As the new manager of the exchange completes the first year of its ambitious reform programme, it has established a consultative model that will play a key role in the future.