Chapter 8 is the rulebook a broker works under on the Dubai Financial Market, from the duties it owes DFM, the SCA and its clients to the way an order is entered, ranked and matched. It carries 11 of the 100 exam questions, and its rules are exact: who must be told, by when, and in what order.
This chapter looks at the Dubai Financial Market from the broker's side of the desk. It opens with what a brokerage firm owes DFM, the SCA and its clients, and how a failed settlement is dealt with. It then turns to the DFM trading rules and the Professional Code of Conduct, which together govern order handling, inside information, confidentiality, complaints and records. The last three parts are the most mechanical: price limits and the trading sessions, the order types and conditions, and the way the system ranks orders. Learn the sequences and short lists exactly, because changing one detail, a period, a recipient or a step, turns a correct rule into a wrong one.
A DFM brokerage firm has to keep the market informed. It tells DFM about any material change, development or shortfall that could affect its financial position as soon as it arises, and it reports any breach of SCA or DFM rules by its own employees. It must hold, at all times, the solvency it needs to run its business and meet its obligations, judged against criteria the SCA sets. A firm licensed for several activities runs each one through its own dedicated, autonomous department, kept apart from the others to avoid conflicts of interest. It must not publish or promote incorrect information about parties whose securities are listed, and it keeps client orders and their back-up copies for ten years.
No trading for a client can happen until a written agreement is in place, dated and signed by people with legal authority on both sides, covering what each side may expect and must do, and how the account will run. The broker opens a trading account for any investor without asking for a minimum advance deposit, but before the settlement date it must check that the client can pay for what was bought. A third party may instruct for a client only under an authenticated power of attorney that fixes the limits of what they may do. Every order records the date and time, the security, the quantity, the price and the expiry, and a written order is signed. The client and the custodian are told of each execution when it happens, in writing or by the agreed method.
When a client who bought has still not paid by the end of the two-day settlement period, the broker must sell the securities at market price, with DFM's approval, no more than one working day past the settlement date. The client carries any loss, and a profit is paid to the Investor Protection Fund. A trading member without clearing status must sign a settlement contract with a clearing member, give the SCA and DFM a copy, and take no cash from its clients, who pay the clearing member instead. A trading and clearing member cannot credit a post-dated cheque until it has been cashed, cannot pay cash to a client whose account is in debit or beyond the credit balance, subject to the margin trading rules, and must get DFM's approval before selling a debtor client's shares.
Under the DFM trading rules, orders are handled fairly and in the sequence received, so a favoured client's later order cannot overtake an earlier one on the same terms. A client's order also comes before the broker's own orders and those of any account it has an interest in. Within the client's own conditions, the broker must try its hardest to secure the best price on offer at the moment of execution. Only people on the firm's register of representatives may enter orders, although clients can key in their own through an online or electronic platform the broker provides. Each client receives a statement of securities, cash and all transactions every three months, or more often if the agreement says so, and unrequested sale proceeds are credited to the client's balance within the settlement period.
A broker must not trade on inside information for itself or clients, and the rules treat advance knowledge of a large planned deal in a security, or of one just completed, as inside information. For a client who is a listed company's board member, general manager or insider employee, the broker checks the closed period: 15 days before the company discloses its financial statements, ten days before it announces material information. Conduct designed to create a misleading impression of a security's price or volume is banned. An order breaking the issuer's articles of association or UAE law must be refused; if executed, DFM can order a reversal and take disciplinary action, any excess goes to DFM and any shortfall falls on the broker. A wrong-account trade is corrected on a request normally made within 30 minutes after the session ends.
The Professional Code of Conduct starts with people. Client-facing staff need the qualifications, experience and training their work demands, and the firm must resource continuous, effective oversight of everyone it puts in front of clients, other firms or the market. Whatever its employees do, get wrong or neglect in the course of their jobs, the firm answers for it in every case. Nobody unlicensed or unregistered may operate the electronic trading or clearing systems, and nobody unauthorised may log in under the firm's username. An employee's personal dealing must go through the firm that employs them, with written sign-off from its manager and from DFM; dealing through another firm needs DFM's CEO to approve. Client due diligence means reasonable steps to establish who the client is, how to reach them, how solvent they are and what they want to achieve.
A client order can reach the firm in four ways: in writing with the client's signature, by recorded phone call, by fax or by email; an unrecorded oral order is refused. Client information stays confidential unless the client consents or the SCA, DFM or a competent court orders disclosure. The firm's own accounts are kept separate from clients' accounts. Complaints are checked and answered immediately, and a client whose complaint is not dealt with at once is told what other steps the rules allow. Suspected manipulation goes to DFM immediately. Market data is published only after it is verified and the company concerned has announced it. Trading on knowledge of a client's order, and entering or cancelling orders to fake activity, are prohibited. Records are kept up to date, on paper or electronically, and DFM may inspect them.
The online trading regulations cover daily price limits and the shape of the trading day. A newly listed share that trades on no other market has no price limits until the close of its first session with at least one trade; that closing price then anchors the next session's limits. A foreign share already trading on its home market starts on DFM at its last closing price from that principal market, and the daily limits start on its first DFM day. The day runs in five sessions: pre-opening, opening, trading, pre-closing and closing. Pre-opening collects orders without executing them, the opening session fixes one opening price, the trading session matches orders as they arrive, pre-closing ends in the closing auction, and the closing session allows only data, reports and enquiries.
A limit order fixes the price; for a buyer it is the most they will pay. A market order names no price and trades against the best prices on the other side; with nothing on the other side it is rejected. Conditions then control how long an order lasts or how much must fill, and an order entered with no validity becomes a day order. Priority runs on price first, then time of entry, and size never decides it. At the same price, an order brought forward from the previous session beats one entered today. Raising the quantity or changing the price re-stamps the entire order; cutting the quantity or changing only the validity keeps its place. To switch the share type, market type or order type, cancel the order and enter it again.
A short revision checklist written by Bourse Prep from the syllabus and from our verified question bank. Use it to check yourself after studying the chapter. It does not replace the official workbook. Unfamiliar term? See the UAE FRR glossary.
The figures in this chapter that the exam material states, each with the rule it belongs to. Learn the figure and its owner together. Test yourself on them in Rules Lab.
| What | Figure | Context |
|---|---|---|
| Retention of client orders and their back-up copies | ten years | a DFM rule, separate from the general AML record-keeping minimum |
| Client statement of securities, cash and transactions | every three months | unless the client agreement sets a shorter period |
| Settlement period for a client purchase | two days | the client must pay within it |
| Sale after a client fails to pay | one working day after the settlement date | at the latest, at market price and with DFM approval |
| Closed period before financial statements | 15 days | for board members, the general manager and insider employees |
| Closed period before material information | ten days | the same insiders, before an announcement |
| Request to correct a wrong trading account number | 30 minutes after the session ends | a later request only in exceptional cases, accepted by the DFM CEO with Authority approval |
| Pre-opening restriction on weakening orders | the final five minutes | no cancellations, lower bids, higher offers or smaller quantities |
| Minimum advance deposit to open a trading account | none | the broker may not require one |
| Cash needed to buy and sell in the same session | the full purchase value | held as credit in the cash account when buying |
| Price limits on a newly listed share with no other market | none until its first session with a trade closes | that session's close sets the reference for the next session |
Places where the syllabus draws a line between two rules that sound alike. They are not predictions about any exam.
There are two windows, and the type of disclosure decides which one applies. Before financial statements are disclosed, the insider is barred for 15 days. Before material information is announced, the bar is ten days. A date that falls outside the shorter window can still sit inside the longer one, so identify the disclosure first and count second. The window is set by time alone: nothing the insider says about what they know shortens it.
Both auctions start the same way, by looking for the most volume that can trade and the least left over. They part at the tie-break. The opening price then prefers the smallest change from the previous close and, if still tied, the highest price. The pre-closing auction instead takes the midpoint of the tied prices and rounds it up to the next tick. Keep each tie-break with its own auction.
Both act immediately on entry. Fill-or-kill is all or nothing: if the whole quantity cannot trade at the permitted price, the entire order is cancelled and nothing executes. Fill-and-kill takes whatever can trade straight away, at the specified price or better, and cancels only the balance. Fill-or-kill sets no price of its own and is never applied by default; it has to be chosen.
A newly listed share with no other market trades without price limits until the close of its first session with at least one trade, and that close becomes the reference. A foreign share already trading at home opens at its last closing price on its principal market, and the daily limits apply from its first DFM day, although DFM management can apply different procedures to foreign shares when there is good reason.
A trading member only executes. It contracts with a clearing member for settlement and must not receive client cash at all. A trading and clearing member does handle client cash, so its rules are about how: no credit for a post-dated cheque until it is cashed, no cash paid to a client in debit, and no freezing a client's securities unless a court ruling, a DFM procedure or an Authority resolution allows it.
Raising the quantity re-stamps the entire order, not only the extra shares. Cutting the quantity, or changing only the validity, keeps the original priority, and no DFM approval is needed. Changing the order type, for example from limit to market, is not an amendment at all: the order is cancelled and a new one entered.
Study tools for the rules in this chapter: side-by-side comparisons, decision paths and procedures. More are collected in Rules Lab.
| How long it stays valid | What happens to any part not executed | |
|---|---|---|
| Day order (also what an order with no time limit becomes) | Until the session it was entered in ends | Expires and is removed from the system automatically |
| At-the-close order | Until the end of the trading session | Expires and is removed; a fresh order is needed to keep trying |
| Good-till-date (GTD) | Until the end of a date the broker specifies | Expires at the end of that date and is removed |
| Good-till-cancelled (GTC) | No set end: until it executes or the investor cancels it | Stays in force and is carried forward to later sessions |
| Immediate-or-cancel (IOC) | Must execute immediately | Any remaining quantity is cancelled |
| Fill-or-kill (FOK) | Must fill completely the moment it is entered | If the whole quantity cannot trade, the order is cancelled in full and nothing executes |
| Fill-and-kill (FAK) | Executes immediately, in full or in part, at the specified price or better | Whatever does not execute immediately is cancelled |
A broker wants to change an order that is already resting in the DFM order book.
Price always comes first; entry time matters only between orders at an equal price, and size plays no part.
The learning objectives for this element, as the CISI UAE Financial Rules and Regulations syllabus, Version 4.2, effective 10 September 2023 lists them. Every question in our bank is mapped to one of them.
This chapter has 71 questions in the Bourse Prep bank, spread across six workbook sections. Filter practice to Chapter 8 and treat each miss as a pointer to the exact detail you slipped on: a period, a recipient, a sequence or a condition. The last three sections reward drilling, so rebuild the session order, the order conditions table and the priority steps on this page from memory before each new set, then check them against the page.
15 questions from all eight chapters. The answer is only revealed once you have committed to one.
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