Capital Market Development Phases

First Phase: Prior  to Establishment of MSM (1970- 1989)

 

The year 1971 is the starting point of the Omani capital market when Oman Hotels floated shares for subscription as the first joint stock company. Then a number of joint stock companies emerged to reach 71 companies at the end of this phase including 23 closed joint stock companies and 48 public joint stock companies with shareholders’ equity of RO 269.9 million distributed among 17,000 shareholders.

 

Throughout this phase dealing in securities was unorganized and the brokers dominated the market further to lack of necessary information to investors. This prompted consideration of organizing the market for utmost benefit of the Omani economy. Studies were conducted and recommendations made to establish an organized securities market in the Sultanate.

 

Second Phase: Establishment of Muscat Securities Market (1989- 1998)

This phase witnessed a significant move in the development process of the capital market in the Sultanate by establishing MSM  and commencement of work therein in 1989 as the entity responsible for regulation of the capital market and investor protection and finding sound and efficient ways in directing savings  toward productive investment for the benefit of investors and the national economy in general as the organized capital market is essential to the economic development and growth.

 

This phase also witnessed the move from manual trading to electronic trading as an electronic trading system was introduced in 1997 as the first Arab stock exchange to apply electronic dealings which led to rapid, disciplined and accurate dealings.

 

As the market was new and trading volume was low MSM assumed the regulatory, trading, settlement and depository roles. However, the volume of trading and type of transactions in the capital market in the Sultanate as general caused the applicable laws and regulations inadequate for the such development  MSM’s administration  assumed the trading operations, settlement, deposit and transfer of records, pledge and attachment of securities which dominated over the regulatory role and weakened confidence in the markets and exacerbated the crisis the market witnessed in the first quarter of 1998.

 

Third Phase : Restructuring  and  separation of the regulatory body  from the stock exchange (1998 up to now)

 

This is the most important phase of the development of the Omani capital market as it witnessed many events that caused drastic changes in the mechanisms of the capital market, its structure and organizational framework.

 

Rapid economic and financial developments the Sultanate has witnessed posed a challenge to the regulatory framework it was unable to face. To preserve the interest of investors and develop the financial sector in view of the changes in the international and regional arenas it was imperative to amend the existing legislations and establish new institutional framework able to cope with the needs of the domestic market and in line with the best laws and practices and international experience. Thus, Royal Decrees 80/98 and 82/98 were issued to restructure the securities market  to allow for the establishment of three separate bodies.

 

  1. I.                    The Capital Market Authority (CMA)

 

CMA is regulatory and supervisory government  entity with the aim of regulating   and supervising the capital market and insurance sector in the Sultanate.  

 

 

  1. II.                 Muscat Securities Market

 

Government entity with financial and administrative independence for listing and trading of securities   regulated by CMA and its board of directors comprises representatives of:

 

  1. The Government.
  2. Brokerage and listed companies.
  3. Representative of small shareholders

 

  1. III.              Muscat Clearance and Depository  Company (MCDC)

 

Established after the establishment of CMA and separation of the regulatory and executive functions as closed joint stock company owned by the MSM, banks, investment companies and market intermediaries. Its function is safe keeping of shareholders’ registers, depositing, registration and safekeeping of securities, selling and buying contracts and issuing ownership certificates and issuing statements for shareholders thereon. It is linked with MSM by electronic link for easy transfer of data.

 

Thus, the securities market stands on a solid foundation based on enhancing confidence in investment and activation of market operations placing the Sultanate on top of the countries of the region in separation of regulatory roles from that of the stock exchange.

 

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