Several revised rulebook modules and new financial services amendment regulations have been released by the Abu Dhabi Global Market (ADGM). These extensive changes bring ADGM’s regulations on virtual assets, commodities, listings, capital raising, and benchmarking up to date. These are all major areas of expansion for ADGM. By fostering its green economy and drawing listings of start-ups and expanding businesses, for instance, the zone hopes to take the lead in these rapidly growing industries. To further support ADGM’s attempts to regulate this space, the current virtual assets regulations have been expanded to include some non-fungible token activities. The main changes are outlined in this note.
Sustainable Finance and Environmental Instruments
Instruments for the Environment
To comply with regulations, carbon credits will be exchanged like other financial instruments under the new notion of “environmental instrument,” which is introduced in the rules. When these instruments are used, general regulatory regulations, financial promotion guidelines, and licensing requirements will all be triggered. The modifications show ADGM’s intention to increase its influence in the world market for carbon emissions. More regulation of the carbon credit market is needed to guarantee a stronger verification procedure.
Sustainable Finance
Abu Dhabi Global Market has imposed additional environmental, social, and governance-related reporting and disclosure obligations on issuers. The environmental and social policies and hazards of mining and petroleum firms must be disclosed under new regulations.
Commodities Markets
Spot Commodities
In contrast to futures, which are for a later delivery date, ADGM is proposing a new regime for “spot” commodities markets, or buy/sell contracts for immediate delivery. Although other well-known international marketplaces have not yet implemented strict financial laws for spot commodities trading, ADGM believes that the market is moving in favor of regulation.
The operation of trading venues and the supply of custody for spot commodities are among the activities that will be subject to regulation in ADGM under the new regulations. The right to operate spot commodity auction platforms will be granted to authorized businesses, subject to adherence to safeguarding regulations, procedures, and controls.
Asset Derivatives
To reduce the possibility of excessive speculation and price swings in commodities derivatives, ADGM has implemented new procedures. It is now expected of recognized investment exchanges (RIEs) to reduce the risks associated with volatile pricing that could otherwise occur from orderly trade. To lower the danger of market abuse, they will be authorized to impose price restrictions for derivatives and have to implement position limits for commodities derivatives and any other pertinent derivatives that are physically settled. On an annual basis and upon request, they must demonstrate to the FSRA how their position restrictions effectively prevent market abuse.
Listings and Capital Raising
Listing Requirements
Although ADGM has been a successful energy derivatives marketplace, it has not yet attracted a robust securities listing market. The MKT rulebook has undergone several revisions aimed at strengthening the underlying framework to help this industry grow. New qualifying requirements based on profits and assets will facilitate access to the ADGM Official List for SMEs and early-stage companies. By permitting all listed firms to issue new shares to new investors equal to up to 20% of their current share capital without requiring consent from current shareholders, ADGM seeks to support growth-stage businesses. Additionally admissible are shares with weighted voting rights and preference shares.
Continuous Disclosure Obligations
As part of the new regulations, firms now have stronger obligations regarding continuous market disclosure. With the new authority, the FSRA can stop trading at a firm’s request so that it can delay revealing insider knowledge. Listed funds, which were formerly governed by a different set of regulations, must now report in the same manner as other companies that have listed securities.
Benchmarks
There are now new guidelines for managing certain benchmarks and disseminating related information. The ADGM law did not previously address this topic. Taking into account the size of the underlying market and the total value of contracts referencing the benchmark, the FSRA will determine whether benchmarks are “specified.”
The guidelines outline the information that administrators must gather to establish a certain benchmark, as well as the organizational and governance requirements for benchmark administrators. In addition, non-discriminatory access to pricing and other details about designated benchmarks, as well as licenses to utilize the benchmark, must be provided by benchmark administrators.
Conclusion
In the UAE and Abu Dhabi, the Abu Dhabi Global Market is a crucial component of a larger economic diversification strategy. There is undoubtedly a chance that ADGM, as a financial hub, will draw in new companies and players in the developing global economy. When ADGM has been successful, it has usually been in fields where it has been more agile or taken the lead, like in fintech and the common law’s adoption. Compared to the United States, the United Kingdom, and the European Union, which have frequently been sluggish to act or overbearing in some of these burgeoning areas, it is currently well-positioned for the growing carbon reduction sector.
