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Sukuk disclosures and secondary market

Sukuk disclosures and secondary market. Abu Dhabi. Agenda. Primary Issuance Processes; Role of Listing Disclosures Secondary Market. What information do investors need?. Public vs. private offering (+hybrid). Roles of listing. Public offering, listing, and trading in an exchange

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Sukuk disclosures and secondary market

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  1. Sukuk disclosures and secondary market • Abu Dhabi

  2. Agenda • Primary Issuance Processes; Role of Listing • Disclosures • Secondary Market

  3. What information do investors need?

  4. Public vs. private offering (+hybrid)

  5. Roles of listing • Public offering, listing, and trading in an exchange • Key benefits of listing: • Enforced disclosures • Requirements by institutional investors • Standardized documentation and requirements • Secondary market/trading (?)

  6. Roles of listing: Disclosure Example: Saudi Electricity Company in Dublin Example: Listed sukuk in NasdaqDubai

  7. Key disclosure items • Information on issuer and parties to transaction • Terms of sukuk: • Amount • Dates of issuance, maturity, compensation (coupon) • Amount of compensation • Places of depository, clearing/settlement, listing, regulatory approval (as applicable) • Structure of transactions (types of sukuk) and cash flows, tranches etc(as applicable). • Legal terms and conditions: security, recourse, guarantee, seniority, covenants, etc. (as applicable) • Sharia approval • Rating (as applicable) • … and any other information considered important for investment decision making

  8. Sample disclosures • UK Sovereign Sukuk listed in London • Kazakhstan Sukuk listed in Kuala Lumpur • JANY – Goldman Sukuk in Luxembourg SE

  9. Secondary markets • Sukuk should use the same infrastructure for bonds and other securities • Key characteristics of bond secondary markets • Lower liquidity as compared with equities • Large value, small margin • Most trades occur over the counter • Trading platforms exist outside of the formal exchanges • Types of trading venues: • Over the counter • Electronic trading platforms (ETP) • Stock exchange • Inter-dealer broker

  10. Secondary markets (cont’d) • Trading venues by types of participants/organizer: • Single-dealer platforms • Dealer-to-dealer platforms • Multi dealers-to-customer platforms

  11. Types of trading models • Order-driven • Continuous auction system • Single auction system (or call system) • Periodic auction system • Quote-driven • = market maker system • Hybrid • Specialist market: a market maker in an order-driven system • Global market: order-driven system and quote-driven system in the same market • Request for quote system

  12. Trading Simulations

  13. Thank You • Ketut A. Kusuma; kkusuma@ifc.org; +1-202-458-4987

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