KCC: ‘Central Broker' project takes effect at Kuwait market
This project represents a radical transformation in the infrastructure of the Kuwaiti securities market, as it will have a far-reaching positive impact in enhancing market stability, improving risk management, and supporting the development of innovative financial products. This project is a milestone in the modernization of Kuwait's financial market infrastructure.
The establishment of the Kuwait Clearing Company (KCC) as the central intermediary marks a milestone in the development of the Kuwaiti financial market, reflecting a firm commitment to building a more robust and transparent environment for investors, in accordance with international best practices. In the near term, the new mechanism will contribute to enhancing market stability by reducing the risks associated with settlement processes.
The Kuwait Clearing Company will act as an intermediary between the buyer and seller of securities transactions, ensuring that financial obligations are executed efficiently by both parties. This contributes to increasing confidence, especially among institutional investors, allowing for increased liquidity and more efficient settlements while minimizing operational risks.
For investors, the presence of a central broker provides higher protection and better operational efficiency, and paves the way for the introduction of advanced financial instruments such as derivatives, thus expanding the base of available investment products.
In the long term, this approach strengthens Kuwait's position as a regional financial center, opens the way for greater participation by foreign investors, and supports the market's inclusion in the ranks of developed global markets, in line with Kuwait's Vision 2035. Additional projects launched in the second part of the third phase of the market development program.
In addition to the launch of the Central Broker, the current phase witnessed the implementation of several important projects, most notably:
•Completion of cash settlement through settlement banks and the Central Bank of Kuwait system.
•Introducing the 'Qualified Broker' form.
•Establishing a sub-account number within the consolidated accounts.
•Preparing the legislative and operational environment for the introduction of new products such as ETFs, bonds and sukuk, which will soon come into effect.
•Modifying the settlement mechanism using the delivery versus payment model (DvP Model 2)
•Implementation of the Risk Waterfall Model
Strategic transformation in clearing
As part of its efforts to develop its corporate structure and implement the highest standards of governance, Kuwait Clearing Company (KCC) established two separate legal entities:
•Kuwait Clearing Company (KCC), which is the entity licensed to carry out clearing agency activity, which includes the provision of clearing, settlement and central intermediary services.
•Kuwait Central Depository Company (KCDC), the entity authorized to provide securities depository services.
This corporate structure aims to apply the highest standards of governance and ensure clear segregation of duties, in line with international best practices, and promotes clear operational and organizational boundaries between clearing, settlement and depository functions.
Rigorous testing enhances
market readiness
Since 2022, KCC has intensified its efforts in collaboration with the Capital Markets Authority and Boursa Kuwait to carry out 31 comprehensive tests covering all key market sectors, including brokerage firms, custodians, the Central Bank, local banks and investment firms. These tests aim to ensure the readiness of the technical infrastructure and the efficiency of the operational integration of the entire chain of operations.
Fahad Abdulrahman Al-Mukhaizim, Chairman of Kuwait Clearing Company, said: 'The launch of the third phase of the market development project is a strategic milestone that reflects Kuwait Clear's commitment to its role as a central financial institution that contributes to market stability and efficiency.
This phase is in line with global shifts in the field of financial market infrastructure, focusing on developing the central clearing house (CCP) model and implementing more flexible and transparent systems to enhance security and minimize risks for the participating parties.'
Al-Mukhaizim emphasized that: 'Kuwait Clearing Company sets its sights on strengthening the position of the Kuwaiti market in the ranks of emerging and developed markets, and continues to work to expand its services and link it to regional and international markets, in order to serve investors and achieve the goals of economic development in the State of Kuwait.'
We highly appreciate the active role of the Capital Markets Authority in developing the trading system and the continuous support of Boursa Kuwait. On the occasion of the launch of the third phase of the market development project, Duaij Raad Al-Saleh, Chief Executive Officer of Kuwait Clearing Company, said: 'This phase of the market development project is an extension of an ambitious vision that Kuwait Clearing Company (KCC) is working on in partnership with the Capital Markets Authority (CMA) and Boursa Kuwait to enhance the efficiency of Kuwait's capital market infrastructure and increase its competitiveness regionally and globally.
During this phase, the company has been keen to implement innovative solutions and apply international best practices in the areas of post-trade services, including clearing, settlement and centralized depository, while expanding collateral services and linking with related systems, which will enhance investor protection and ensure the integrity of transactions.' He added: 'We are working in an integrated effort with all stakeholders to ensure a smooth transition to the upgraded systems, and we are proud of our pivotal role in supporting market development and providing advanced services based on technology and a sustainable institutional structure.'
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