As part of its Market Development Project (MDP) – which aims to boost listings, as well as increase the volume of local and international trading – Boursa Kuwait is putting the final touches on a series of initiatives that are expected to greatly expand the range of products and services it offers. Central to this is a new central counterparty (CCP) system that is scheduled for launch in the first half of 2024.
Under the CCP system, specialised financial institutions that have been approved by Boursa Kuwait and the Capital Markets Authority (CMA) are projected to take responsibility for the counterparty credit risk between parties, and offer clearing and settlement services across a range of trading options. The system will also pave the way for the introduction of a range of associated products and services.
New Opportunities
During 2023 Boursa Kuwait prepared for the launch of the CCP system. This involved running and concluding a series of stress tests on Kuwait-based financial brokerage firms to ensure that they were capable of meeting the settlement requirements of domestic lenders and the Central Bank of Kuwait. The testing process was also prolonged by the need to develop the necessary regulatory framework around the CCP system, while also evaluating when the climate within the domestic economy would be appropriate for launching the new procedure.
In a January 2024 interview with the World Federation of Exchanges’ monthly magazine, Focus, Mohammad Saud Al Osaimi, CEO of Boursa Kuwait, said that the rollout of the CCP system is a priority in the transformation of Kuwait’s capital markets, with the launch of the system planned for in the first half of 2024. This would mark a milestone in Boursa Kuwait’s commitment to strengthening the country’s financial ecosystem.
Part of that transformation is aimed at drawing more international interest in Kuwait’s capital markets. In October 2023 Boursa Kuwait officials presented the new product during a roadshow. Held in London in conjunction with Kuwait Clearing Company and Jefferies Financial Group London, the three-day event saw Kuwaiti officials meet with representatives of international investment management and financial advisory firms to provide briefings on the latest developments at Boursa Kuwait and the forthcoming launch of the CCP system. The system’s expanded product and service range is expected to also further reinforce Kuwait’s drive to boost its market status.
International Recognition
In November 2020 the MSCI reclassified Kuwait from a frontier market to an emerging market, adding seven local stocks to its Emerging Markets Index. In April 2023 Boursa Kuwait introduced a new system for reporting electronic trading accounts as part of its efforts to meet the requirements for being listed on the FTSE Russell Index, with additional initiatives in process to help the domestic exchange qualify as a developing emerging market.
Once the CCP system is operational, Boursa Kuwait is planning to broaden its product base with corporate fixed-income and exchange-traded funds. Platforms for these are due to be launched subsequent to the CCP system coming online, and initial steps have already been taken. CMA and Boursa Kuwait officials have begun discussions with potential local issuers to encourage them to list on the exchange’s platform once the appropriate rules and bylaws have been ratified.
In November 2023 an analyst conference reviewing Boursa Kuwait’s performance during the third quarter of 2023 saw the CCP system described as developing the way for introducing standardised derivatives as part of the fourth phase of Boursa Kuwait’s MDP, including options and futures. This would signify a change for Kuwaiti capital markets, with the number of products on offer multiplying in tandem with the regulatory framework and market infrastructure to handle their entry. Investors are likely to be paying close attention to how the new CCP system performs and how quickly new products become available to their end-users.
Read More from OBG
