Date: 10/06/2002

Investors trading on the Amman Stock Exchange can look forward to world-class standards of efficiency and security this summer, as the Jordan Securities Depository Center prepares to launch a state-of-the-art “Electronic Clearing and Settlement” system for registering and transferring ownership of stocks on the Amman Stock Exchange.

The electronic system will eliminate most settlement risk by synchronizing the exchange of cash for securities. It is a major step in the ongoing efforts of the Securities Depository Center (SDC), the Jordan Securities Commission (JSC), and the Amman Stock Exchange (ASE) to implement international best practices for the protection of investors in Jordan’s Capital Market.

"Electronic Clearing and Settlement" incorporates a sophisticated electronic book-entry system, in which trading instruments such as stocks are represented in computer records rather than by traditional engraved paper certificates. Under the new SDC system, investors will enjoy the convenience and speed of electronic securities registration, transfer, and trade settlement, and can obtain up-to-date account information on their shareholdings. Investors will also reap the benefits of reduced cost and risks previously associated with issuing and handling physical securities scrip. The SDC oversees clearance and settlement, and maintains the Shareholders Register for companies traded on the ASE.

"The implementation of ‘Electronic Clearing and Settlement’ is an exciting achievement for the SDC," said Mr. Samir Jaradat, SDC’s chief executive officer. "The technology is extremely fast and cost-effective, and ensures a more secure and transparent environment for Jordan’s Capital Market. This new system demonstrates Jordan’s readiness to become the region’s most secure and vibrant evolving capital market, giving local and international investors even more reason to trade at the Amman Stock Exchange," Jaradat stated.

Under the "Electronic Clearing and Settlement" system, shareholders’ registers submitted to the SDC by issuers are checked before they undergo "cleansing." This process includes verifying shareholder identity and ensuring that company capital is equal to shareholders’ balances. Brokers are required to provide Letters of Guarantee to ensure the fulfillment of their obligations.

The system is a transitional step to the full implementation of "Delivery versus Payment" (DVP) — a globally recognized mechanism that ensures that the final, unconditional transfer of securities from the seller to the buyer (delivery) occurs if and only if the final transfer of payment from the buyer to the seller also occurs.

Ultimately, this first phase of implementation of "Electronic Clearing and Settlement" will enable the SDC to evolve to irrevocable DVP where the SDC will maintain the official ownership records for the shares of every Jordanian company, which will be available to authorized users in both Arabic and English. The system includes significant market surveillance capabilities. SDC participants (for example, brokers) will use the system to identify their clients and to clear and settle their trades. Clients will be permitted to register their shares directly in the Company Register. Secure communications and user authorization are essential tools to ensure complete protection of data from unauthorized access.

Mr. Jaradat reiterated that the smooth and successful implementation of “Electronic Clearing and Settlement” procedures depends on the cooperation of all those involved in Jordan’s Capital Market, especially public shareholding companies, brokers and investors. Companies must keep the SDC informed of all changes to its shareholder register. Brokers must confirm that their clients are authenticated in the SDC’s centralized Registry System before entering any selling orders through the electronic trading system. The main responsibility lies with the investor, to authenticate and update all relevant identification information with the issuers of securities the investor owns.

The system will be the sole register for securities with an estimated value of at least $10 billion within just a few years (current market capitalization is $5.8 billion), making security, reliability and stability vitally important to the orderly conduct of business in the Capital Market. To protect against minor or major disasters ranging from basic software failure to earthquakes, the data maintained within the system is carefully replicated and preserved at all times.

The SDC began operating in May 1999 as a non-profit, private institution with administrative and financial autonomy. The SDC is one of the most important institutions in the Jordanian Capital Market. It has been assigned, in cooperation with the Amman Stock Exchange, the task of bringing about a qualitative leap in market efficiency. The SDC seeks to attract local and foreign investment, create a favorable environment for capital investment, reduce investment cost and raise the settlement system efficiency in the Kingdom. A seven- member board of directors and the chief executive officer oversee the SDC.

When the new technology is launched in July 2002, the SDC will embark on the third phase of a five-phase strategic plan aimed at establishing global standards in Jordan’s Capital Market. The plan is being implemented through financial and technical support provided by the USAID-funded AMIR Program.