13 July, 2008

Dubai Financial Market and its brokerages

There are still some very weird things going on at the Dubai Stock Market or rather, among the brokerages there. I have been exposed to stock markets worldwide but what we get here from time to time, should be on the front pages of all newspapers.
Lately another prime example happened to my colleague. He was trying to sell his Emaar shares through his broker at DFM at the market price. Usually, such a sell order takes only a few seconds to be executed. But...his order didn't go through after more than a week and it is still pending. When he complained to the broker, they told him that because his order was "small", it would have to be queued in a "special order" queue. Meaning, that clients with the largest order have priority to trade!
So if he is trying to sell 1000 shares and somebody comes in and sells 1 Mio. shares at the same price, the large order gets priority.
Brokers at DFM take a AED 45 comission on trades smaller than 15000 AED. Anything above AED 15000 gets them a 0,3% commission.
So...my friend contacted the DFM in order to inquiry about such a "priority law". Not susprisingly, such a law apparently does not exist. Even though he complained officially, the broker has never been warned or fined...nor was he able to sell his shares!
If you have any similar experiences, pls contact me.

15 comments:

Dubai Blog said...

I never knew anything about Dubai stock market and this is the first time that I had a glance at how it is.

moryarti said...

Let your friend speak to the media...

Hatem said...

I have never had such bad experience with the broker in DFM. I trade from time to time (since 2004) and I place the orders by phone and the calls are recorded. You need to specify the validity of your order if it’s one day or one week. I have never heard about such thing called “priority” based on the amount. I am not sure if your friend did specify in his order - whether by fax, phone, hand, or online - that his order is valid for one day only. If he did this, then he can refer to the DFM authority (not the broker) and I think / hope they will take it seriously. As far as I know, if he didn’t mention, then the default is “one day”; and “one week” ends by Thursday anyway, even if the order was placed on Wednesday. To my knowledge, the commission is 0.00275 * total AED amount + 10 AED per order. I am not sure about the minimum, but it was 75 AED long time ago. Maybe they changed it to 45 these days!

Hatem said...

Forgot to say that he should have a copy of his order in which written the date and time of his order (if it was by fax or hand). If it was by phone, then the phone call is recorded as well as its date and time. If he goes to DFM authority, they will get the date and time of his order and the date and time of the transaction. If he specified “one day”, then it’s a black and white case.

Broadcasters of Tomorrow said...

Great Post
I've been telling my journalism students that financial and business journalism is the growth area.
Hopefully they'll listen and dig into these kinds of situations.

hallodubai said...

to hatem: the commission is still AED 75, but the share out of that which goes to the broker is AED 45 - the rest goes to the market and clearing etc.
If you think about it, it's very obvious that brokers are interested to sell/buy shares of large orders. It makes them a fortune. Why should they bother with orders who only get them 45 AED?
Sad but that's what's happening!

Dubai Warrior said...

I think it's the same problem with taxi drivers and apparently now their system everywhere. Forcing high charges to get in and stay and then a specific payment model that doesn't add up, then sitting back assuming it's proper control. Taxi drivers have a good set meter but a high cost of daily taxi charges and many fines for every silly things, that's why they break the law today and passengers suffer. Similarly brokers on the stock market had to freeze tons of money (over a million dirhams) and are charged very high rent for their spots in DFM, so it's only natural that they either tout or break the code as it doesn't add up: millions frozen held at central bank for license with high running cost but are allowed to charge peanuts.

kipp said...

http://www.kippreport.com/kippsblog.php?articleid=1403&day=2

mentioned it on Kipp Report this morning. maybe it will generate more feedback

bb said...

Your broker sucks, fill an official complaint, raise hell with the management. Not by phone, physically!
Go see that broker and waste his time until he place the order. If you can't see him, wait for him outside his office and chase him around with your SUV, maybe threaten his family a little bit.

That should work. :)

Alternatively, if you can be contacted by the press please state how. They will not go after your story if they can't get a comment from you.

Shylock.You know. From Shakespeare's Merchant of Venice. said...

I'm surprised that anyone should be surprised by such a practice. Isn't this Dubai, the land of greedy and crooked souls? The broker is only living up to the spirit of the place!

Shylock said...

That should be:

from Shakespeare's Merchant of Venice.

Why am I being cut short duh.

Scarlett O'Hara said...

Will someone please put up a post on Miss Universe? Please please please!

Then we can have a field day bitching about if-you've-got-it-flaunt-it-style.

Sorry about hijacking your post Hallodubai, but i do have to ask somewhere right? Seeing yours is on top of the page..

hallodubai said...

well, this is what happens if you officially complain at DFM. They say they will investigate the issue. Few hours later, you get a call from your broker saying: did you call DFM? Is anything wrong? That's all there is too it. Nothing after that. So DFM investigation is simply calling the broker. Hah, what a joke.

hallodubai said...

i would also be VERY interested to find out, how brokerage staff gets paid. I assume it is viable that some brokerages pay according to the turn over of their staff. Such practices are also common among Forex brokerages. Anybody here works at a brokerage :-) ?

sharewadi said...

That sounds unusual to me rather than the norm. I've traded less than 20,000 dhs in one order many times over the past few years, with several different brokers, by telephone, fax, in person, and online. I've never had that happen to me. However, I have heard of it before, and I have heard of some brokers requiring minimum order sizes before they'll trade.

If you check the market daily trading logs, you'll see that there are a large number of orders going through at lower amounts. For example so far today, it looks to me like about a quarter of Emaar trades are for amounts less than 50,000 dhs per order. Not the best example because at 10 dhs per share instead of 1 or 2 dhs per share, many punters with little understanding of share prices, don't see them as "cheap".

If you want a suggestion, find another broker, and open an online trading account (you can transfer your shares to the new broker via CDS).

Here are comments about some UAE brokers and also a list of DFM brokers (with user ratings). Hopefully the OP will add his/hers :).

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