By: Amr Adel

Dubai – Mubasher: The UAE’s Securities and Commodities Authority (SCA) on Wednesday recommended that brokerage companies operating in the country must consider mergers, according to unnamed sources.

The sources told Mubasher that this recommendation came after brokerages reported falling profits, while others logged losses in 2016.

Mergers will support their brokerage firms’ financial positions, the sources said, indicating that merger benefits include: reducing expenses, lowering costs of services, raising companies’ financial abilities and efficiency, added to getting loans from international banks with reasonable conditions.

Other benefits include the reduction of markets membership fees, reducing the cost of technical systems and their maintenance, the sources who spoke on condition of anonymity told Mubasher, adding that mergers can help new firms can expand in trading processes.

UAE brokerage firms reported a combined 96.4% profit plunge to AED 4.5 million in 2016 on the back of lower trading volumes, compared to AED 125.5 million in 2015, data by SCA showed.

Of the 48 registered brokerages, 30 recorded losses, while only 18 were profitable. They further logged a combined revenue of AED 605.9 million in 2016, down 13.5% from AED 700.5 million in 2015.

On the Dubai Financial Market (DFM), traded volumes declined to 95.91 billion shares at a turnover of AED 122.11 billion in 2016 from 97.09 billion shares and liquidity of AED 157.9 billion in 2015.

Meanwhile, on the Abu Dhabi Securities Exchange (ADX) traded volume increased slightly to 29.258 billion shares from 27.51 billion shares, while turnover fell to AED 48.81 billion from AED 59.13 billion in 2015.

Translated by: Mohamed Hesham Azab