LONDON, 29 October 2007 — The Saudi Stock Exchange Tadawul is on a selected list of stock exchanges which is recognized by British banking regulator, the Financial Services Authority (FSA) and Her Majesty’s Revenue & Customs (HMRC) for the purposes only of Section 48A of the Finance Act 2005, which stipulates that a sukuk (an Islamic bond or trust certificate) must be listed on a recognized stock exchange.
The other stock exchanges included on the list are Abu Dhabi Securities Market, Bahrain Stock Exchange, Dubai Financial Market, Dubai International Financial Exchange, Labuan International Financial Exchange, and Surabaya Stock Exchange.
The FSA and HMRC recently clarified the listings of alternative finance investment bonds such as sukuk and the tax implications involved in this year’s Finance Act 2007
Sukuk listings involves largely primary issuances especially in the GCC countries. In Malaysia, listings cover both primary sukuk and Islamic private debt securities issues and active secondary trading to the tune of about RM1 billion a day. The Dubai International Financial Exchange (DIFX) has the largest volume of asset-backed sukuk listings but has no secondary trading.
This is followed by Bahrain Stock Exchange and Labuan International Financial Exchange (LFX).
The move by HMRC and the FSA is good news for the sukuk market and should pave the way for a more active approach to secondary trading.
More global sukuk issuances are now being listed on the London Stock Exchange (LSE), which is set to emerge as one the most important secondary trading platforms for sukuk. Already an estimated $1 billion of sukuk secondary trading is done through London annually.
With more GCC sukuk issuances now listed in London included the second issuance from Riyadh-based property developer, Dar Al-Arkan Real Estate Trading Company (DAAR), London has both an opportunity of leveraging and leading secondary trading of Sukuk issuances.
This lack of a secondary market has shied away some Islamic banks from investing in sukuk.
