BAE 2204: MSM's Role in Boosting Oman's Economy, 2020-2021

This report analyzes the role of the Muscat Securities Market (MSM) in boosting economic development in Oman. It begins with an introduction to the MSM, its historical background, and the regulatory framework established by the Capital Market Authority. The report then outlines the functions of the ...Read More

ASSIGNMENT
“Course: - BAE 2204, Principles of Macroeconomics
Academic year: - 2020-2021, Semester 3
Student Name: Yahya Ahmed Said Alriyami
Student ID: 11s17192
Lecture Name: Dr. Mohamed Riyaz khan
Section number: 6”

Role of Muscat security market in boosting economic development
Introduction:
The Muscat Securities Market (MSM) is the sole place where stock trading takes place in the
Sultanate of Oman. When it was originally founded in the middle of 1988, Oman's securities
market needed to be regulated and supervised. To assist with this effort, Oman's Central
Securities Depository (CSD) was established. Later After ten years of consistent growth, there
was a pressing need for an enhancement in the functioning of the market. As a result, “MSM has
been altered as a consequence of two Royal Decrees (80/98 and (82/98). By Royal Decree
(80/98) on November 9, 1998, which issued the new Capital Market Law, two independent
entities were formed. These bodies are the Muscat Securities Market (MSM) and the Capital
Market Authority (CMA)”. Both of these agencies are responsible for overseeing the capital
market. Since the exchange is a government-run institution, it is not subject to the regulation's
financial or administrative oversight. Oman's securities industry has been well-established in
order to increase investors' faith in the capital markets. This has been accomplished by
expanding and improving all stock market activities.
As part of the ongoing process of “the securities market's evolution, the MSM has developed its
regulations to give information and financial data related to the performance of the Market and
all listed firms directly to investors through a cutting-edge electronic trading system. This is part
of the MSM's effort to continue the market's trend toward greater transparency and efficiency.
Not only will this guarantee that fair business practices be followed, but it will also encourage
investors to make the proper investment decision at the appropriate time”.

Functions of Muscat Securities Market:
The primary purpose of the Muscat Securities Market was to control Omani's securities market
and to aid the financial industry. Its aim is to "create an efficient environment appealing to
investment," and its objective is to “move ahead with times towards efficiency”.
The institution is responsible for overseeing the trading of shares, as well as “maintaining the
integrity of settlement procedures by laying the groundwork for fairness between buyers and
sellers. Additionally, the institution provides traders with the necessary infrastructure, such as
trading houses and platforms, to sell and buy shares on behalf of their customers. Those investors
who have a need to liquidate their investments in listed firms may achieve their goals via the use
of this strategy”, and those investors who wish to invest in the same companies can acquire the
securities that are now being offered.
As a regulatory body, it exercises authority over brokerage companies and maintains appropriate
corporate governance by conducting ongoing monitoring and surveillance of these businesses to
determine the extent to which they are in conformity with the legislation and regulations imposed
by the regulatory bodies. Additionally, it immediately disseminates information in order to
maintain appropriate disclosures for the benefit of the general public. It guarantees that brokers
are lawfully licensed to operate and satisfy the minimal standards to function as such, with the
goal of shielding the general public from the possibility of being exploited or losing money.
According to the annual report of the organization for 2018, “the goals of Muscat Securities
Market are to promote savings, spread investing awareness, and provide protection for investors.
It creates an atmosphere that is favorable for investing in securities that have been issued by

public enterprises, bonds issued by the government, investment funds, corporate bonds, and even
foreign instrument tools for the growth of the economy and investors”.
Economic development and financial stability: the role of the Securities
Market:
The role of securities markets in promoting economic growth and stability cannot be overstated.
Following Oman's Five-Year Economic Plan and Vision 2020, the Muscat Securities Market
plays an essential role in the growth of Oman's economy and in the generation of its economic
resources. The securities exchange directly affects the investors and issuers through a well-
governed, technologically enabled, and transparency-enabled market entity. MSM provides its
stakeholders a platform to source capital to widen their businesses to engage in the construction
of economic infrastructure in the country. Further, the securities market provides its investors the
opportunity to diversify their investments and savings by giving them investment options in form
of listed companies and IPOs.
Moreover, central banks influence interests, which affect the degree to which investors can
borrow from local banks to invest in stock markets. If such interest rates are higher, the level of
loans that individuals and companies can borrow to invest in the stock market will be lower. The
central banks and monetary agencies; thus, have the ability to influence the factors that enhance
the viability of investing in stock markets. It also controls the level of liquidity that is available
for investment in stock markets in the Oman state as well as in other economies. In the securities
markets, central banks are also involved in implementing their monetary policy through such
platforms. For instance, the organization may opt to buy some bonds in an effort to release cash
to the economy through an expansionary monetary policy. The result is an increase in demand

for such bonds in the market and has the potential of increasing rates on such bonds. Moreover,
by releasing such cash to the markets, investors are forced to divest the excess liquidity into
other market securities. Central banks thus have a significant influence on the overall viability of
the stock market in Omani as well as in other countries.
The role of the Muscat Securities Market:
It is possible for investors to purchase and sell tradable assets on the exchanges. Thereby
providing liquidity by sending cash straight from “one individual to the organization that
requires financing or an investor who wants to utilize the money for other purposes. For this
reason, Muscat Securities Market has made significant investments in cutting-edge trading
software. For example, the institution has been utilizing Auto Euronext Markets Solutions
(AEMS), the most advanced stock market system in the world, since 2006, and updated to NSC
V900 in 2011”. Investing in the finest technologies improves the speed and accuracy of
transactions, allowing for a more efficient exchange of shares, bonds, and money. Data and
information necessary for monitoring reasons as well as reliable public reports are also provided
by this system.
The securities markets also play a role in monitoring and regulation. The 118 listed businesses
and other exchange members that operate on Muscat Securities Markets' trading floor are all
under the direct management of Muscat Securities Markets. As a result, it guarantees that the
firms adhere to all applicable laws and regulations and takes action against those that don't.
Capital Markets Authority oversees the process of listing and delisting corporations from the
stock exchange. Any changes that may influence the firm's operations are communicated to the
public and the company performs monitoring to ensure compliance. It also recommends new
legislation or adjustments to current regulations in Oman's securities market to enable its

seamless operation. Finally, the Muscat Securities Market guarantees that all participants adhere
to the regulations in order to provide a fair playing field for all parties involved in the market.
By encouraging savings and investment of these savings, the Securities Market promotes growth.
Purchasing stock in one of the listed firms ensures that the money invested stays inside the
business, allowing it to continue production and operations. As an alternative, investors would
demand a piece of the company's capital if the Securities Market was non-existent, therefore
removing the much-needed funding. The Muscat Securities Exchange also allows institutions in
Oman who need to raise extra funds and have their requests approved by the Capital Markets
Authority to list their new shares or bonds. Consequently, this institution serves a crucial
function in collecting money from lenders and disbursing that money to businesses so that they
may run more efficiently and effectively.
Muscat Securities Market also plays a role in raising awareness and making information
available to all participants. It has organized talks and participated in investor and student events
in order to accomplish this goal. To improve disclosures and openness, it's hosted seminars for a
number of public limited businesses, and it offers a variety of training courses based on investing
principles. All stakeholders in the market are empowered by having access to all the information
they need to make informed decisions about their investments. This method eliminates any flaws
in the market that may allow traders to exploit it for their own profit.
Regulations of MSM Securities Market:
“Regulation of public issuers of securities, secondary markets, asset management products, and
market intermediaries are all included in securities regulation. Regulators aim to address
information asymmetry between issuers and investors, clients, and financial intermediaries, and

between counterparties to transactions; and to ensure the smooth functioning of trading and
clearing and settlement mechanisms to prevent market disruption and foster investor confidence.
For public issuers, the notion of complete, timely, and accurate disclosure of pertinent
information is the foundation for regulatory frameworks that are in place. Most securities
regulators have shifted away from merit-based regimes to disclosure-based regimes, in which the
regulator does not take on the job of evaluating whether or not an offer is excessively risky for
investors. Rather, the regulator's job is to make sure that investors have access to complete,
timely, and accurate information so that they may make well-informed judgments. A disclosure
duty is placed on an issuer at the time of authorization for a public offering and remains in place
after that”. In addition, there are safeguards in place to guarantee that the information issued by
the issuers is accurate. As a result of current regulations governing issuers, the importance of
good corporate governance has been made clear.
Brokers, dealers, and advisers are subject to regulation “to guarantee that they can enter and exit
the market without interruption, handle their business with their customers with proper regard,
and trade fairly in markets. Licensing requirements (including prudential requirements) and
market and business behavior duties are the primary methods for regulating intermediaries.
Regulation of asset management attempts to guarantee competent management and sufficient
disclosure of assets for investors. Collective investment schemes, such as mutual funds and unit
trust funds, are the focus of most regulatory regimes. The concept of comprehensive, timely, and
accurate disclosure that applies to all issuers also applies to the units of collective investment
schemes. In addition, the operator and investment manager of the collectives investment plan are
financial intermediaries and subject to the same regulations as other financial intermediaries”.

It is the goal of secondary market regulation to guarantee that the markets operate as expected. In
order to preserve the integrity and efficiency of the market, the regulation of market behavior and
trade is essential. As a result, “the legislation is focused on ensuring that market participants
satisfy their trading commitments in a timely way through regulation of the clearing and
settlement process and the establishment of criteria for risk management”.
Muscat Securities Market Functions to be Improved:
Due to the world economy and oil price fluctuations, the Muscat Securities Market is particularly
vulnerable to price swings. When the global economy is growing and oil prices are rising, the
market is thriving. A Bloomberg article in April 2019 stated that the Oman market was one of
the worst-performing in the Gulf region in terms of return on equity. With fluctuating global
economies and oil prices putting Oman's businesses at risk, the Muscat Securities Market needs
to help listed companies shift their focus to more stable industries such as manufacturing. If the
institution wants to retain investor confidence and keep share prices constant, it should also urge
the development of a fund that helps institutions that have been worst hurt by the fall in oil prices
to weather the storm.
Conclusion:
In the end, it is concluded that in Oman's economic growth and resource production, the Muscat
Securities Market plays an essential role. Through a well-governed, technologically equipped,
and transparent market institution, the securities exchange directly influences investors and
issuers. This means that the 118 listed businesses and other members of the Muscat Securities
Markets trading floor are under direct supervision by Muscat Securities Markets. This guarantees

that the firms adhere to all applicable laws and regulations, as well as taking action against any
participants who do not.
References:
Al-Lawati, H. A. (2019, April 10). Measures necessary to bolster Muscat stock market.
Retrieved from Oman Observer Website: https://www.omanobserver.om/measures-necessary-
tobolster-muscat-stock-market/
Muscat Securities Market. (2019). 2018 Annual report. Oman: Muscat Securities Market.
Muscat Securities Market. (2019, November 13). History. Retrieved from Muscat Securities
Market website: https://msm.gov.om/page.aspx?
b1=OurProfile&b2=History&p=HistoryEvents&ti=History.
Muscat Securities Market. (2012). MSM – WFE application official submission: 18/3/212 –
Confidential. Retrieved June 15, 2022, from http://www.worldexchanges.org/files/file/General
%20Assembly%202011/Item%205a%20-%20Annex%20-%20MSM%20candidacy
%20paper.pdf
Muscat Securities Market. (nd). Trading rules. Retrieved June 15, 2022, from
https://www.msm.gov.om/.
The International Organization of Securities Commissions. (2014). Strategic Framework for
Investor Education and Financial Literacy. Madrid: IOSCO Board.