Banker Middle East sits down with Khaled AbdulRazzaq AlKhaled, Chief Executive Officer of Boursa Kuwait, for an exclusive insight into the exchange's strategy in propelling the Kuwaiti market to new highs
editor's pickTuesday 06, November 2018
What led to the introduction of a Boursa Kuwait’s new Rulebook earlier this year?
Prior to the take-over, the exchange was regulated by various decisions issued by Kuwait Stock Exchange (KSE) setting forth rule and regulations with respect to selected topics. By issuing its rulebook, Boursa Kuwait provided efficient and wellregulated market place satisfying the requirements of the Capital Markets Authority’s. Boursa Kuwait’s aim is to provide issuers, brokers, listed companies and all market participants with attractive, efficient and well-regulated market and to define roles and responsibilities.
In addition, Boursa Kuwait Rulebook introduced mechanisms with respect to the access the activities and services of the exchange, re-enforcing fairness and transparency towards investors, which is fundamental to implement sound practices, orderly functions of the exchange and sustain confidence in the overall financial market. The Rulebook encompasses transformational changes such as a three-tiered segmented market, the introduction of new market-capitalised indices and circuit breakers on securities and indices to curb volatility, as well as entirely new listing requirements that was made effective 1 April 2018.
This phase marked a milestone within Boursa Kuwait’s mission to develop a liquid, reliable and sound capital market providing issuers with efficient access to capital, and investors with diverse return opportunities, which is set to see Boursa Kuwait fortify its position as a leading regional exchange. The new market segmentation is a particularly major step, creating a ‘Premier’, a ‘Main’ and an ‘Auction’ market, each with unique characteristics and obligations. In response to this segmentation, Boursa Kuwait also introduced new marketcapitalised indices, which represent the segmented markets. All sectorial indices have been reset to reflect the start of the new markets. In light of these major developments and changes, the Boursa Kuwait Rulebook, was also amended to include all the listing requirements reflective of the market segmentation.
Moreover, a circuit-breaker system on securities and indices has been put in place as a measure to prevent potential market disruptions. Boursa Kuwait has an unequivocal commitment to pursuing best practices and increasing transparency for the benefit of their stakeholders. Its strategy focuses on developing the overall market status and addressing the needs of market participants through the provision of investment tools, restructuring the market to increase its competitiveness and liquidity, and attracting investments from local and international investors.
Are we likely to see further regulatory overhaul and reforms?
Given the nature of the exchange operations in any given market, there is always room for further regulatory overhaul’s and reforms. For the Kuwait market in particular, we will continue to develop the overall market status in terms of rules and regulations and products and services, while developing the overall framework of the exchange. Moreover, Boursa Kuwait recently introduced the Over The Counter market (OTC), which serves as a trading platform for companies that are not listed on Boursa Kuwait. OTC transactions will be carried out through licenced brokerage offices working under Capital Market Authority bylaws and Boursa Kuwait rules relating to the OTC market.
The newly introduced market will create a transparent environment by bringing buyers and sellers together using fully supervised mechanisms and will adopt the clearing and settlement procedures. Boursa Kuwait is also in the stage of introducing the third and fourth phases of market developments, which will include the introduction of short selling, REITs, trade at last (TAL), off-market trade enhancements two and stock swaps in 2019, and moving forward, we will also witness the introduction of cash-CCP, qualified brokers, margin lending, equity repos, derivatives CCP, index futures, security options and exchange traded funds (ETFs).
In June, this year FTSE Russell announced that its Industry Classification Benchmark had been licenced by Boursa Kuwait for all equity stocks listed on its markets. What was the strategic incentive behind this adoption and what effect will have in the long-term?
Adopting the FTSE Russell Industry Classification Benchmark ensures that our exchange will adhere to international standards and increase transparency as well as adopt universal benchmarks, allowing the exchange to flourish and expand. Our goal to achieve worldwide status and becoming a regional leader just became a little closer with this step, an important milestone in our journey and goal of developing a liquid, reliable and sound capital market providing issuers with efficient access to capital, and investors with diverse return opportunities, evolving into a leading regional exchange.
Following the announcement that MSCI would include the MSCI Kuwait Index in its 2019 Annual Market Classification Review for a potential reclassification from frontier markets to emerging markets status, how likely we will see Boursa Kuwait’s accession to emerging markets status?
The reclassification from frontier to emerging markets is a major achievement for any country, which typically brings with it large capital inflows from international investors. The State of Kuwait is a nation that is fully equipped to be considered for the reclassification and with our ongoing efforts to continuously develop the infrastructure of the exchange, and solidify its position on an international level, I am confident that Boursa Kuwait will reach the emerging markets status.
How has Boursa Kuwait sought to establish a robust corporate governance framework?
Our efforts towards establishing a robust corporate governance framework initiated from the company’s internal culture and approach, in compliance with Capital Market Authority regulations and requirements, while also maintaining focus on accommodating the needs and expectations of all stakeholders. By building a robust corporate governance framework we aim to develop all policies, procedures and regulations in relation to governance, and more importantly to build the culture of governance across all company sectors. Within this governance framework we focus greatly on creating independent regulatory functions, and enhancing levels of accountability, responsibility and transparency.
Accordingly, the framework has been established with the aim of applying policies and procedures, and the formation of a committee made up of the company’s board members, while taking into consideration the competencies and expertise required from all members of the committee. Moreover; Boursa Kuwait invested tremendous efforts in identifying functions and responsibilities of each member of the board and the executive management, to ensure efficient coordination amongst all, in addition to outlining privileges and authorities delegated to the executive management.
Boursa Kuwait recently received admission as a full member to the World Federation of Exchanges. What does this membership admission mean for the exchange?
The WFE membership is an important point of reference for many international investors. The full membership status reflects Boursa Kuwait’s commitment to implement the highest standards and international best practices. Our aim is to become the leading stock exchange in the Middle East, which falls in line with our nation’s 2035 vision, for which one of the key objectives is to establish Kuwait as a regional financial hub, and the full membership is surely a significant step towards achieving that goal.
What was the reasoning behind the launch of the new digital educational portal, Boursa Academy Online?
The platform was successfully launched in September and is one of Boursa Kuwait’s important milestones. The aim of Boursa Academy Online is to improve capital market knowledge and educate investors on a wide range of relevant topics, ranging from how to trade, common investment mistakes as well as risks of investing, to enable them to make informed investment decisions. From the day, it was launched, the online portal has provided educational and training facilities such as ‘Market Watch’, ‘Virtual Trading’, ‘Statement of Account’, ‘Portfolio’, among other, targeted to investors of various experience levels.
The launch of the ‘Boursa Academy Online’ is testament of Boursa Kuwait’s long-standing commitment to develop a reliable and sound capital market. Its goal is to ensure that individual investors are equipped with the right tools and information so that they are confident when getting involved in trading and are aware of the choices available to help them make investment decisions. The academy also aims to promote financial literacy among the Kuwaiti public more generally, which will in turn help increase investment in the local capital market. With this new educational offering, Boursa Kuwait addresses the need to bridge the knowledge gap in trading and financial know-how, which is one of the main factors driving individual investors to participate in the capital market.
The academy will act as a trusted source of information where members can access state-of-the-art tools and resources. Boursa Academy Online is also an important platform to educate the recent development or updates to the financial markets which are constantly evolving. Therefore, it is important for institutions like Boursa Kuwait to ensure individual investors are kept informed of the new trends and risks associated with investing. We see it as our mission at Boursa Kuwait to help build a sustainable financial environment through continuously improving Capital market literacy, thus enabling investors to maintain an in-depth understanding of the different structures and procedures within the capital market so they can better asses their goals.
Additionally, the portal delivers training solutions to help beginners—such as university students—understand the basics of investing and the instruments available in the market. The content is delivered in an Information rich platform. Pursuing best practices and increasing transparency for the benefit of its stakeholders is part of Boursa Kuwait’s mission to evolve as a leading regional exchange. To this end, its strategy focuses on developing the overall market status and addressing the needs of market participants through the provision of investment tools, restructuring the market to increase its competitiveness and liquidity, and attracting investments from local and international investors.
What is your personal management style?
Managing an exchange requires a complete hands-on approach on all fronts. But that is not possible to do without an efficient, experienced and strong team. At Boursa Kuwait, that is how the operation is managed; as a team. To date, by allowing every experienced and specialised person to do their job while offering the support required to ensure it’s done properly, is what got us to where we are today. I am proud of each and every team member across the entity, and the success we have witnessed today is due to their unwavering diligence and commitment.