Middle East Banks and Custody
For those of us old enough to remember, owning shares in a Middle Eastern public shareholding company meant having a piece of paper, a share certificate, stating the company’s name, the shareholder’s name, and the number of shares owned. The share certificate was usually issued by the company, which maintained a shareholders’ registry to document who owned what of its shares. The safekeeping of share certificates was primarily done by investors themselves – the papers were deposited in old fashioned iron and steel safes, or under mattresses. Middle East capital markets came a long way since then. Many markets in the region now require all public shareholding companies be listed on stock markets. Ownership of shares is no longer proofed via nice, glossy cardboard certificates – dematerialization came to town. Citing a scholarly work by Rachel Muigai in 2018 on the concrete industry, ScienceDirect defines dematerialization as “…the reduction of the quantities of materials needed to serve an economic function, […].” For capital markets, dematerialization meant moving from physical, paper certificates of share ownership to electronically recording such ownership. This electronic registration of share ownership is meant to be more secure, and more accommodating to the speed of trading that takes place on stock markets everywhere. In our dematerialized world, ownerships of shares in listed companies are shown as “statements of accounts” similar to one’s bank statement which shows one’s cash held at a bank. The investor, or shareholder, is issued a statement indicating the names of listed companies she or he owns shares in, and how many shares are owned in each company. The question that arises is: who is authorized to issue such a legally binding ownership statement? And this is where Central Securities Depositories, or CSDs, come in. CSDs are legally empowered to register ownership of shares of listed companies, and reflect changes in such ownerships resulting from the buying and selling (trading) of shares that takes place on stock markets. CSDs also issue official statements of share ownerships. One of the implications of the fact that shares are no longer physical pieces of paper but are electronic records of ownership is that shareholders, or owners of shares, can no longer deposit (keep) the shares they own in iron and steel safes or under mattresses to safekeep this form of wealth (as they may do with cash). Shareholders, be they individual retail investors, or investment funds, have three options as to where they can safe keep the now dematerialized shares they own in listed companies. And the choice between these three locations depends on investor needs, and risk appetites. It is a reasonable assumption, since the local CSD is where share ownership is legally documented, to keep one’s shares deposited for safekeeping there. As a matter of fact, this is the default setting, so to speak, in many Middle East capital markets. The shareholder can also choose to keep their shares with their broker. This second option is appealing to some investors who are active traders. Keeping the shares with their broker means that investors can execute sell orders faster than having to transfer the shares from the local CSD to the local broker before selling. Transferring shares from the CSD to the broker can take 24 hours and this waiting time may cause a loss of an attractive sell opportunity. The third option is to keep one’s shares with a custody service provider. Custody is the service of safekeeping shares, and other securities, on behalf of investors. Custody is a service typically offered by banks. And it is not difficult to see the connection here – when share ownership was manifested in physical paper certificates, investors who did not have iron and steel safes used the safe vaults of banks to safekeep these “certificates of value.” Overtime, as shares got dematerialized, the custody service provided by banks was no longer related to the safekeeping of physical share certificates but the electronic safekeeping of the the dematerialized shares themselves – as a bank client electronically transfers money to their bank for deposit in their account, they can also transfer and deposit their dematerialized shares with their bank for safekeeping. The custody service offered by local banks is important to international investment funds investing in frontier and emerging markets, such as those of the Middle East. These funds have fiduciary responsibility towards the pension funds and family offices who give them monies to invest. Investopedia provides a good summary of what fiduciary responsibility is all about: fiduciary responsibility “…involves actions taken in the best interests of another person or entity.” “The fiduciary accepts legal responsibility for duties of care, loyalty, good faith, confidentiality, and more when serving the best interests of a beneficiary.” “A breach of fiduciary duty occurs when a fiduciary fails to act responsibly in the best interests of a client.” Duty of prudence is part of fiduciary responsibility. “Fiduciaries must administer matters and make decisions concerning the interests of beneficiaries with the highest degree of professional skill, caution, and critical awareness of risk.” A breach of fiduciary responsibility can lead to legal action in courts of law that put penalties on those who breach and award all sorts damages to those that suffer a breach of fiduciary responsibility. Loss of reputation to those who breach is also major blow. International investment funds trading the region typically have two main relationships: one with a prime broker, and the other with a global custodian. The prime broker is there to execute buy and sell orders for the fund, buying and selling listed shares, as per the decision of the fund management. The prime broker also at times provides research on listed companies as well as margin financing to the fund. The prime broker may be able to execute directly on a local exchange, if it is licensed locally to do so, or it can use the services of a local broker to serve its investment fund clients. The global custodian, typically an international bank, chooses a local custodian bank to serve the custody needs of its clients, the investment funds. The local custodian bank safekeeps the shares owned by the investment fund, and acts as part of a checks and balances system that the fund puts in place to fulfill its fiduciary responsibility towards the pension funds and others that give the fund monies to manage and invest on their behalf. Unless the fund is actively trading certain shares, it will not keep shares with the local broker, for reasons of fiduciary responsibility. The broker may go bankrupt, or fraud may be committed at the local brokerage house. Investment funds need to guard against such scenarios and usually do this by keeping the shares they own at the local custodian bank. Investment funds can certainly choose to keep shares they own at the local CSD, but most do not opt for this option, even though Middle East CSDs are primarily owned by local governments, either directly or indirectly. This is because investment funds require additional services when investing in frontier and emerging markets, services that Middle East CSDs are not fully able to offer yet. In addition to the safekeeping of shares (custody), international investment funds require services such as the collection and remitting of company dividends (the profits that listed companies distribute at the end of each year to shareholders) and interest payments on debt instruments (such as those paid to the holders of government or corporate bonds). Implementing company corporate actions, such as the distribution of free shares to existing shareholders, a common practice in the region, is also a service that international investment funds need someone on the ground to undertake on their behalf. Voting at shareholders’ meetings by proxy is another service in increasing demand that local custodian banks can do for international investment funds. By and large, CSDs in the Middle East are not yet fully able to offer international investment funds the complete suite of these corporate action services. To their credit, some CSDs in the region have started on the dividend distribution service offering but, from an international investor’s perspective, it makes more sense to have all the needed services offered by one service provider – a local custodian bank that is vouched for by the investor’s global custodian. The custody service industry in the Middle East has ample room for growth. On the supply side, some countries have both global and local custodians offering custody services to international, regional, and local investors. On the demand side, clients of custody services in most Middle East markets tend to be international investment funds. Growth of custody service provision is increasing as more local banks start offering this service. Growth of demand for this service is increasing as more local retail and institutional investors start seeing the added value of using the services of local custodians. Regulatory changes that would require all investors, local or international, to have custody accounts, be they at the local CSD or with a local custodian, will also increase demand for custody services in the region. It is not easy for a local bank in the Middle East to equip itself with the infrastructure needed to offer custody services to global custodians. Investments in technology in addition to, more importantly, personnel are needed to offer custody services according to international best practices and in manners that enable the underlying investors, the international investment funds, fulfill their fiduciary responsibilities. For global custodians to board local custodians, a long due diligence process is involved. And the relationship, once established, is only revisited once every three years or so – unless there are compelling reasons to do. The relationship that an international investment fund has with a local custodian is different from the one it has with a local broker. The latter is more short term - the risk element is basically based on a trading cycle of T+2 and as a result buy and sell orders can be executed with a local broker of choice, monitored by the fund’s local custodian. Choosing a local custodian, on the other hand, is normally the decision of the global custodian bank serving the investment fund – not of the investment fund itself. This is all part of fiduciary responsibility issues. Custody service fees in the region fall under what banks call off-balance sheet revenue streams – these are revenue generated without lending and, as such, this type of service provision does not normally impact banks’ capital adequacy ratios. Off balance sheet revenues actually increase a bank’s return on equity – a bone of contention between shareholders of some banks in the Middle East and the management of those banks. If your bank is returning around 10 on equity and other banks in the region or internationally enjoy ROEs of 20 or more, then, as a bank CEO, you may wish to consider increasing your off-balance sheet revenues by offering new services to new and existing clients – custody is certainly one of those services you should consider. The business model of universal banking has been undergoing revision since before Covid. As international banks continue to resize their global presence, local and regional banks in the Middle East are enjoying new room to expand service offerings to local and international investors, and custody services are ripe for the picking.
Nov 13, 2022 · 10 min read
Why Immigration, As We Have Come To Know It, No Longer Works
With the French presidential election around the corner and immigration a main theme and an issue of contest and one-upmanship between the candidates, I am reminded of a long August weekend in Paris, several years ago. Although I was warned beforehand that nothing happens in Paris in August, that all its inhabitants leave on vacation and the city fills with irritating tourists (like me!), I did manage to have a good time. Paris never disappoints, no matter the month, season or reason for being there. Paris did not disappoint but I did manage to irritate a good friend who chaperoned me through this beautiful city for four days. I had made what I thought to be a casual observation about French taxi drivers which led my friend to accuse me of being a racist. Needless to say, I was taken aback. I do not consider myself to be prejudiced and go out of my way to give each individual an equal amount of deference, respect and benefit of doubt regardless of race, ethnicity, or religion. So how did this happen. It was a warm August evening and my friend had selected an elegant yet casual restaurant in the 6th Arrondissement. We took taxis to and fro and afterwards I had commented on the different ways the two cabbies drove. The first cabbie, a Frenchman, was smooth, handled his cab deftly, and slowed down before he reached red traffic lights for a quaint halt. He seemed to be plugged into “the Paris traffic matrix.” The second driver exhibited signs of what I thought to be discomfort with the traffic system. He got too close to cars in front or on the side of him, was abrupt with the brakes, and veered off his lane too many times. He would constantly attempt to overtake cars ahead of him even though they were driving at reasonable speeds, and then would change his mind. The second driver was an immigrant; an Arab, most probably from North Africa. Juxtaposing the driving of the Arab cabbie with the self assured mannerisms of the French one, I wondered aloud why was it so. My friend, who is a person of the world, sensitive to issues of immigrants in France and someone who has witnessed firsthand some of the ills that plague many developing countries, was aghast. After successfully managing to offend my friend and guide to the French capital, I began to think why is it that we seem to relate to the same space we inhabit in different ways. Both taxi drivers were French, even though one was an immigrant, recent arrival and the other “more native.” Both were tested and licensed to drive a taxi in Paris by the same authority. Yet both related to the same space, that is the streets of Paris, in different ways. Many factors influence the way we relate to our environments, including the spaces around us. Many factors, yes, but ultimately it is our frame of reference that determines how we interact with that piece of human reality called space - not just physical space but other kinds of space as well: spiritual and religious, intellectual, political, social, and economic. Our frame of reference determine the way we live and conduct ourselves, the way we relate to universal human rights, our aspirations, our borders and boundaries and the borders and boundaries of others, and and much more. Whether we are conscious of it or not, each one of us has a frame of reference. A dictionary defines a frame of reference as a set of criteria or stated values in relation to which judgments can be made. Put differently, one’s frame of reference is the ultimate distillation of all those inputs that we have over the years absorbed, been subjected to, and digested. These include one’s religion, culture, tradition, language, political beliefs, the social systems we inhabit and our histories and experiences, both as individuals and as groups. And it has to do with taxi drivers in Paris because for immigrants to assimilate in their new countries and realize their full potential as citizens they need to absorb and integrate the frames of reference of their new societies. In the olden days, when immigrants left their countries for new and better lives elsewhere, they truly left. Once the journeys were made, the distances crossed could not be bridged back with ease. The only way to stay in touch with the “old place” was via slow and cumbersome mail systems. There were no phones, no airplanes, no email or internet. And travelling was long and expensive. Nowadays, when an immigrant lands in the United States, United Kingdom or any other destination, the umbilical cord connecting him or her to the motherland is not automatically severed. Rather, it is sustained and at times augmented by the various technological tools at our disposal. The immigrant can call home, increasingly for free, read most of the print and watch a good portion of the old country’s media on the internet, and join chat rooms with compatriots back home. Having saved some extra cash, the immigrant can find cheap flights to go back and visit. So, in a way, that immigrant never left; he or she can live on a virtual island within the new host country, while staying connected to the old one. To paraphrase the words of a leader of the Social Democrats in Denmark spoken on BBC Radio 4 a few years ago, for the systems of the state to function, be they welfare, or education, employment or what have you, a community needs to be in place with a common denominator. Although each of us has his or her unique frame of reference, individuals living in homogenous societies, in communities, tend to share similar frames of reference. A community is more than a group of people living together in one place. A common frame of reference, with shared values and ideals, is what makes for a community. In the past, immigrants burned the boats that carried them ashore and they had no choice but to absorb the new frames of reference of their adopted lands. Because of technology and what it has put at our disposal, immigrants nowadays are under much less pressure to do so. They can, if they choose, assemble from their new country's frame of reference what they need to get a job and get along, and discard the rest. Immigrants can do this not because they can live without a frames of reference but because they are still plugged into the frames of references of their old homelands. As a result, their moral compass may be influenced by a gravity centre different from the one that is physically sustaining them. Clearly, some immigrants are more in sync than others with the frames of reference of their adopted countries. Be it cultural or religious commonalities, shared languages and histories, geographic proximity, or certain influences during an individual's formative years, these immigrants have a better chance at becoming part of the mainstream community in a receiving country. Countries open up their borders to immigrants for a variety of reasons. Economic arguments tend to monopolize policy discussions but there are political, social as well as humanitarian aspects to this conundrum. So who do we let in and, more importantly, what to do with the immigrants already in but do not share the frames of reference of their new countries? This is a question that many countries are facing these days, including France. The situation gets more complicated because of racist attitudes and religious bigotry towards immigrants by some in the host countries - the inability of those racists and religious bigots to give the immigrants the “space” they need to assimilate and prosper. Technology has dealt us a wild card on immigration. If it is becoming increasingly difficult to assimilate immigrants in their new societies, how can immigration address the legitimate needs of countries and peoples? How hot would the pot have to get these days before its ingredients start melting and gelling together?
Apr 12, 2022 · 7 min read
The Role of Specialized Markets in Facilitating SME Access to Finance
In addition to venture capital and private equity funding, and as both alternative and facilitator of such funding, setting up specialized SME stock markets would serve frontier and emerging market economies well. Such specialized market segments enable Startups and SMEs to issue and list securities to raise growth capital, thus providing companies with an additional route to raise finance. These exchanges also provide additional exit options for investors, encouraging VC and PE funds to invest in SMEs. SME stock markets differ from regular exchanges in important ways: • SME stock markets are not so much about the trading of listed securities but rather the ability of SMEs to list securities to raise growth and expansion capital. • SME stock markets tend to underemphasize traditional listing requirements typically required by standard exchanges, such as a large minimum capital for the listed company and a minimum track record of profitability, and instead focus on strict disclosure and corporate governance requirements for listed SMEs. • SME stock markets play an important role in connecting and networking SMEs looking for expansion capital with VCs, PEs, Family Offices, and High Net Worth Individuals looking for seed, early stage, and expansion investment opportunities. • SME stock markets function as stepping stones for SMEs to grow and eventually list on the Main Boards (standard exchanges), should they choose to. • SME stock markets tend to be “uncorrelated” to the standard exchanges of their home countries and, as such, provide compelling investment opportunities to both retail and institutional investors for hedging purposes. • Due to the sectors they tend to focus on (e.g. technology or technology enabled and new economy sectors), SME stock markets play an important role in attracting regional and international FDI and Portfolio Investments into Frontier and Emerging Markets. An SME stock market could be set up as an additional segment to an existing stock exchange or as a standalone operation. It can be housed within a special economic zone or financial center, helping such centers and special zones realize their full potential by becoming vibrant hubs of business activity. Setting up a specialized SME stock market should be undertaken in partnership with a recognized international exchange, with the latter contributing: 1) the technology 2) the business model, and 3) the brand. It is worthwhile to note that SME stock markets have been launched in several Arab countries such as Egypt, Saudi Arabia, and Dubai. Superimposing a technological solution to connect these markets to create one regional or quasi regional Middle East SME market with multiple entry points and a harmonized set of listing, disclosure and corporate governance rules would increase the size of the liquidity pool available to Middle East SMEs to raise funds from and facilitate mergers and acquisitions across geographies and the creation of regional heroes.
Jun 7, 2022 · 3 min read
Anna Netrebko and Abraham's Foot
It was a balmy May afternoon a few years ago and I was in a minicab heading from North London to the Royal Opera House in Covent Garden. Anna Netrebko was doing Mimi, and although her Musetta’s Waltz is one of my favourites (her encore of the aria at the Waldbuhne a few years ago when she ditched the microphone, singing at the top of her voice to more than 30,000 people was an operatic highlight), it was not to be that summer. Still, one simply did not miss Ms Netrebko at the ROH if one were in London! I am a fan of Puccini and thoroughly enjoyed that evening, with champagne cocktails at the Aldwych preceding, the ROH’s great cuisine during breaks, and, well, La Boheme is a masterpiece. However, when I got back home, I found myself reminiscing not about Mimi, Marcello, and Musetta but about Abraham’s foot. That’s right; Abraham of yonder. Minicabs are a peculiar London detail. They predate Uber, compete with black cabs, and continue to rival both. And North London is full of mini cabs you’d wonder how people would get around without them. Little did I know, getting into my mini cab that afternoon, that a different kind of coup de theatre awaited me. My minicab driver had that generic London look; he could have been Jewish, Arab, Spanish, Greek, Scottish, French, you name it. He turned out to be an Iranian Zoroastrian, having supplied that detail after he inquired of me “where do you come from?” Jordan, I said, and the minicab driver complemented King Abdullah II on his stewardship in a turbulent region. He then asked if I knew what Zoroastrian is and I said yes, volunteering the details that came to mind. My driver then emphasised how old Zoroastrianism is, compared to Judaism, Christianity and Islam. To illustrate, he used the story of Noah’s flood, saying that the events are mentioned in Zoroastrianism’s holy book, which is at least 20,000 years old - so the flood could not have happened some 5000 years ago as “your books say.” I was both glad and intrigued by what he said. Glad that a London minicab driver had enough common sense to realise that Judaism, Christianity, and Islam do share the same foundations, and said as much. I mentioned to him that a famous mythologist, Joseph Campbell, thought that the three religions were basically one religion explained over time to different people through different metaphors and parables. My minicab driver did not seem to quite grasp what Campbell was trying to say but he did start talking about Noah and his ark. He said that Noah lived till he was 900 years old and that he was a giant. How else could he have built an ark to house all those animals. In those days, my mini cab driver said, there were giants living on earth as well as normal people. I “hmmm-ed” and nodded briefly, turning my head to look outside the car window to my right and avoid his piercing eyes reflected in the rearview mirror. Having sensed a certain doubt on my part, my minicab driver went on: When God created Adam and Eve, Eve laid with both Adam and the Devil, and she begat two races, the giants, who were the Devil’s descendants and were superior physically, mentally, and in every other way, and the normal humans who were Adam’s descendants and were, well, mediocre in every way. Noah and his ilk were descendants of giants, my minicab driver informed; how else could they conceive of and build such a thing as the ark. He said that giants continue to live amongst us today. They control the world, politics, banks, big companies. Giants make all the discoveries in science. They took us to the moon. Giants are the ones who built this car. My minicab driver then said: You are probably asking yourself why you do not see giants walking the streets these days. That’s because over so many years they intermarried with normal humans, so their physical shape became the same as ours but everything else is still giant quality, including how smart they are. Even this Abraham of yours, he was a giant. Really? I said. Yes, he said. Abraham would not fit in this here mini cab; you would need to get him a double decker red bus, like that one in front of us! My minicab driver then asked me, in a low voice: Haven’t you seen Abraham’s foot? I said, no, and asked what was that? Aghast, my mini cab driver informed me that there is a slab of stone in Mecca with a print of Abraham’s foot on it, preserved till today, and that the footprint is more than half a meter in length. If that was the size of Abraham’s foot, my minicab driver said, how big and tall do you think he was?
May 24, 2022 · 5 min read
Mideast Brokerage Firms – The Way Forward
Hardly a month goes by these days without news of a new IPO on a Middle East stock market. Saudi Arabia and the UAE continue to garner the lion’s share of these, but other countries are not far behind. New economic and political visions supported by high oil prices are reshaping the region’s capital markets for the better. The Middle East capital markets can be viewed through different prisms, and the “hub and spokes” model is one appropriate vantage point. At the core, the center, are the three capital market institutions, forming the hub: the regulator, tasked with enforcement, reform, and development of the market; the stock exchange, where trading in listed securities, mostly shares, takes place; and the depository, where ownership of securities is registered and where financial obligations of brokerage firms are settled. Three main spokes are attached to this hub: issuers of securities – companies listed on stock markets; investors – both retail and institutional; and, financial service providers – mainly brokerage firms executing buy and sell orders for clients, the investors. Documenting the evolution of the brokerage industry in the MENA region is yet to be undertaken in a meaningful scale by academics and financial historians but when such efforts commence they will undoubtedly highlight the varied stages of development that the region’s capital markets went through, impacting the emergence, operation, and success of brokerage firms. As was the case in many frontier and emerging markets, the Middle East capital markets developed as part of the efforts of governments to catalyze economic growth. As such, stock markets emerged as government owned entities and not the result of private sector initiatives, as in Western economies. This has influenced the frames of reference of capital market stakeholders in the region. The fact that a financial service provider, a brokerage firm, is transacting listed shares for its clients on a government owned financial space in the Middle East imbues brokerage behavior with certain beliefs, some of which may not stand the test of time – permanency of financial good times is one of them. Broadly speaking, the Middle East capital markets witnessed three peaks, as reflected in the rise and fall in market capitalizations and trading values on the region’s exchanges. The first wave was in the mid-to-late 1990s and ended with the bursting the global IT bubble around 2000. International investment funds were trading listed shares in the region, on the stock markets that existed at that time. The second wave gathered pace in early 2000s and culminated with the global financial crisis in 2008/9. Most of the region’s exchanges were up and running during this period, and prime brokers and global custodians substantially increased their coverage of the region’s capital markets, serving international investment funds. The third wave began a few years after 2008/9 and went into hiatus with the onset of the Covid 19 pandemic. Russia’s invasion of Ukraine, new global geopolitical realities, high oil prices, and new economic and political visions in several Middle Eastern countries are all contributing to a fourth wave of capital market activity that promises to surpass, in investment volumes and market and product development, the previous three. This fourth wave will not impact all economies in the region equally. Some countries have neglected their capital markets and some have not fully developed them. These will not enjoy the same fruits of economic prosperity as others that have learned to utilize stock exchanges as engines for economic growth. So, where do brokerage firms stand in all of this? As the saying goes, rising tides lift all boats, and brokerage firms in the Middle East, large and small, all witnessed the blessings of the first three capital market waves that impacted the region since the mid 1990s. And many of them today expect to partake in this fourth one. But this fourth wave heralds a paradigm shift in the region’s capital markets, not the mere onset of another phase in a financial cycle. Another unreasonable assumption that some brokerage firms in the region have is that their respective governments will come in to save the economic day. This is no longer a fiscally feasible proposition. Indeed, astute governments in the region are focusing their efforts on increasing private sector competitiveness, regionally and internationally, rather than acting as spenders and investors of last resort. Will there be enough local trading activity to sustain the old brokerage business model of relying solely on the buying and selling of local shares for local retail clients? This is doubtful, for more than one reason. Astute brokerage firms in the region are redefining themselves as financial service providers, with diverse service offerings, diverse client segments, and varied geographic coverings under their corporate umbrella. The three-pronged strategy of an expanded brokerage service, asset management, and corporate finance advisory may not be appropriate for each and every brokerage firm, given financial resources, but diversifying revenue streams should be a guiding light going forward. Brokerage services can be offered to local, regional and international retail and institutional clients. Some of these clients require the brokerage firm to have, or have access to, equity research capabilities. For example, fiduciary responsibilities and insider trading regulations make it difficult for international investment funds, and increasingly regional funds, to take positions in listed securities without research support. In addition to going after clients in other countries, local brokerage firms may wish to consider offering the world to their local clients, be they retail or institutional – a development the region’s capital markets have been witnessing for several years now. However, the more of a gatekeeper the local broker is, the smaller their bite size will be. And with the increasing ability of regional and international trading platforms and applications to offer services directly to local investors, the more gatekeeping becomes a moot service. To diversify revenue streams, a brokerage firm may offer clients asset management services. Capitalizing on its client base, a broker may offer discretionary or non-discretionary asset management services, and look into setting up investment funds to attract AUMs from existing and new clients, both retail and institutional. Investment funds can also be set up by the firm itself or in partnership with other players in the region, and can be open-ended or closed, and listed on one or more of the region’s exchanges. Examples include mutual funds, REITs, and ETFs. As brokerage and asset management services in the Middle East get commoditized over time, their fee structures and revenue streams will follow suit, becoming less flexible, and with size of assets under management playing a major role in the success of the business. Corporate finance advisory services complement brokerage and asset management. The client networks offered by the asset management and brokerage business lines allow the advisory practice to tap into both deal flow as well as funding sources. Advisory services may include intermediating funding for startup and SMEs for expansion or restructuring situations; advising companies on raising growth capital via private equity investments, corporate bonds, convertible bonds, sukuks, and syndicated loans; advisory on IPOs to private or family companies, as well as depository receipt issuances for the regional and international listings of public shareholding companies; corporate restructurings and turnaround services; and supporting M&A transactions by providing alternative scenarios for capital structures. As the current inventory of IPO-able private firms and state enterprises in the region begins to shrink, and as the need to come up with new and innovative ways to securitize revenue streams in listable and tradable equity and debt products increases, brokerage firms in the Middle East may wish to consider how to disaggregate increasingly obsolete business models and re-aggregate them, on their own or with expanded partnerships and alliances, in ways that better serve the economic growth and prosperity of brokerage firms, investors, and listed firms.
Nov 28, 2022 · 7 min read