Trading
~70 min read
Lesson
Markets, clearing and order handling
UAE trading runs across three main venues — ADX (Abu Dhabi equities), DFM (Dubai equities) and DGCX (Dubai Gold & Commodities). Each follows clear rules for clearing, settlement, order matching and error correction.
Markets & Clearing
Definition · Exchanges and their post-trade processes.
Explanation
Equity settlement on ADX/DFM is T+2 (Trade Date + 2 business days). Delivery versus Payment (DvP) means cash and securities change hands simultaneously. Securities can be pledged up to a maximum of 50% of market value. DGCX is a derivatives exchange; its flagship gold futures contract has a 1 kg lot size.
Why it matters
Settlement, DvP and pledging are heavy exam themes.
Real-world example
A client buys 100 ADX shares on Monday — settlement occurs Wednesday (T+2).
Key exam points
- ●Equity settlement: T+2
- ●DvP — simultaneous exchange of cash and securities
- ●Max pledge value: 50% of market value
- ●DGCX gold futures lot size: 1 kg
Common mistakes
- ●Calling settlement T+1 (it's T+2 on UAE equities)
Order Handling
Definition · How orders are prioritized and matched.
Explanation
Orders match on PRICE first (better price executes first), then TIME (first in, first out — FIFO). On ADX, bonds are quoted as 'Clean Price' (excluding accrued interest).
Why it matters
Price/Time priority is the single most common exam pattern.
Real-world example
Two buy orders at AED 10.00: the earlier one fills first.
Key exam points
- ●Matching: Price first, then Time (FIFO)
- ●ADX bonds quoted as Clean Price
- ●Pre-Opening builds the opening price — no trades execute yet
Common mistakes
- ●Thinking pre-opening orders execute immediately
Settlement Failures & Error Correction
Definition · What happens when something goes wrong.
Explanation
If a client fails to pay for a buy order, the broker must sell out the securities by T+1 after the settlement date. Any LOSS is borne by the CLIENT; any PROFIT goes to the Investor Protection Fund (not the client or broker). Trades booked to the wrong account can be adjusted within 30 minutes of session close.
Why it matters
The 'who gets the profit' question is famous — it's the Investor Protection Fund.
Real-world example
A client fails to pay AED 50k. The broker sells out, recovers AED 55k. The AED 5k profit goes to the Investor Protection Fund.
Key exam points
- ●Sell-out deadline: no later than T+1 after settlement
- ●Loss → client; Profit → Investor Protection Fund
- ●Error correction window: 30 minutes after session close
- ●Broker employees cannot trade for themselves without approval
Common mistakes
- ●Giving the profit to the broker or the client — it goes to the IPF
Numbers
T+2 settlement. Pledge max 50%. Sell-out by T+1. Error correction within 30 min.
Exam Tip
Profit from a forced resale ALWAYS goes to the Investor Protection Fund — never to the client or broker.
Remember
Order priority: Price first, then Time (FIFO).
Review & Memorize
Quick facts
Exam Numbers
Settlement
T+2
Pledge Cap
50%
Gold Lot
1 kg
Sell-Out
T+1
Error Window
30 Min
What You Must Remember
Top exam facts
- ●Settlement: T+2; sell-out by T+1 after settlement
- ●Order matching: Price then Time (FIFO)
- ●Pledge max: 50% of market value
- ●DGCX gold futures: 1 kg lot
- ●Forced-sale loss → client; profit → Investor Protection Fund
- ●Error correction within 30 minutes of session close
- ●ADX bonds quoted Clean Price
Key definitions
- ●DvP — Delivery versus Payment — simultaneous exchange
- ●FIFO — First in, first out — time priority in matching
- ●Clean Price — Bond price excluding accrued interest
- ●Sell-Out — Broker liquidates securities when client fails to pay
- ●IPF — Investor Protection Fund — recipient of forced-sale profits
Key numbers
- ●Settlement: T+2
- ●Pledge Cap: 50%
- ●Sell-Out: T+1
- ●Error Window: 30 Min
Likely exam questions
- ●UAE equity settlement cycle?
- ●Order priority rule?
- ●Maximum pledge value?
- ●Who gets the profit from a forced resale?
- ●Error correction window?