Taking stock

OBG talks to Samir Jaradat, CEO, Securities Depository Center (SDC)

What should be done to help maintain or increase foreign participation in Jordan’s capital markets?
JARADAT: In my opinion, there has been no major drop in foreign ownership in recent years in the Jordanian capital market for several reasons. More share books have been added to more accurately reflect the market dynamics, and there was an increase of capital in previous years, which dilutes the ownership percentage of foreign investors.

The current level of non-Jordanian involvement is reasonable and has been steady both in 2009 and 2010. Non-Jordanians own around half of the stocks, and IMF researchers propose that the Jordanian capital market is an excellent choice for investors looking to Arab markets for portfolio diversification. There is always movement in and out from international fund managers in Jordan, with a healthy balance of daily activity. The broader question is of sustaining and encouraging investment, whether Jordanian or non-Jordanian. We do not view investors as local or non-local. We have to cater our products to investors, both domestic and foreign, to ensure that they continue to invest in Jordan.

What can be done to improve the sophistication of products available for the Jordanian market?

JARADAT: There is demand both for sophisticated financial instruments, like derivatives, and simpler instruments that are accessible to the layman, like Islamic bonds (sukuk). Sukuk’s legal rules and by-laws, given their broad appeal, have the potential to help open up participation in our capital markets if introduced. Crucially, however, we should provide new instruments so that there will be choices available to investors and companies looking to use the capital markets. These new instruments should range from products catering to highly sophisticated investors, who need more complicated investment products, to simple tools that could draw in deposits or savings.

 In addition, we are looking to improve the efficiency of our operations. We began providing e-services two years ago through our website, for example, using the Securities Central Operation Registry Processing and Information Online (SCORPIO) system, a customized platform that facilitates registration, deposit, clearing and settlement, and complies with international parameters and standards. Electronic initial public offerings not only made money for our members but also sped up the pace of transactions. While it may be difficult to attribute an increase in investment to this, there has been an increase in usage of our website and in our daily interactions with retail investors. The convenience and efficiency savings are huge. Instead of going to subscribe for your initial public offering, why not do it at home? We are trying to facilitate a shift towards a paperless environment that improves the accuracy and speed of SDC operations.

What do you think can be done to improve corporate governance in Jordan?
JARADAT: Jordan has come a long way in this respect in recent years, particularly when compared to the rest of the region. Many of the regulatory frameworks in our neighbouring countries are far more vague on issues of transparency, for example. Separation between the board members and the executive management is already present. Auditing committees are in place, as are strict reporting standards and enforcement. Over the course of implementation we moved quickly, opting to first require compliance and then provide further explanation and clarification.