SHARIAH COMPLIANT STRUCTURING CAPABILITIES November 2017
DISCLAIMER Market Securities (Dubai) Limited ( MSD ) is regulated by the DFSA and authorised to deal in investments as well as advise on and arrange investments. MSD is not endorsed by the DFSA as a firm conducting Islamic financial business. MSD structures the financial components of the products that it distributes. MSD does not endorse the Sharia compliance of the product offered, and does not conduct Islamic business under DFSA's Islamic Finance Regulatory Regime. The Islamic business component of the products is structured by the issuers who have their own Sharia Supervisory Board and are subject to their own Regulatory Regime. Any approval of a Structured Product as Islamic would be made by fatwa from the Sharia Supervisory Board of the Issuer and not by MSD. The Client should consult with his own advisors on the Sharia Compliance of the products distributed by MSD. 2
CORPORATE PROFILE Market Securities LLP ( MSLLP ) was established in 2002 in strategic partnership with Kyte Broking Ltd, based on experience and knowledge gained through equity derivatives and energy markets. MSLLP is a fully independent intermediary owned by its founding partners who are dedicated to providing customers with first class broking services and acts as Appointed Representative of the Kyte Broking Ltd. In 2013, the founders of MSLLP established Market Securities (Dubai) Limited ( MSD ) in the DIFC and in 2015 acquired Kyte Broking Limited. Market Securities (Dubai) Limited is regulated by the DFSA and authorised to deal in investments as well as advise on and arrange investments. For the purpose of this profile, MSLLP and MSD will collectively be referred to as Market Securities. Market Securities has offices in London, New-York, Paris, Geneva and Dubai. Market Securities has expanded its skill and experience to a variety of products and the business now covers multi-asset brokerage services on a range of listed and OTC derivatives & securities. Market Securities is today specializing in a broad range of financial products including Cash Equity, Equity Derivatives, Foreign Exchange, Futures & Options, Fixed Income, Interest Rates, Structured Products and Commodities markets. 3
STRUCTURED SOLUTIONS In-house structuring capabilities and crossasset expertise An independent financial engineering team specialising in the construction of bespoke investment solutions for institutional clients. Independent approach with outsourced hedging Bespoke investment solutions based on risk-return requirements Market price optimisation via major trading desks Efficient secondary market Multi-geographical coverage 4
RANGE OF SHARIAH PRODUCTS AVAILABLE IN THE MARKET 5
RANGE OF SHARIAH PRODUCTS Contract Type Contract Application Rate Type Murabaha Commodity Murabaha Ijara (lease) Usually short term, used fo capital needs. Structured against a trade flow, used to arrange financing for raw-material purchases. Liquidity management tooland fund raising tool. Involves buy/sell of commodities on major commodity exchanges. Medium to long term financingunder Islamic type of conventional lease product, backed by real asset. (Real Estate finance, Capital Equipmen finance) Fixed Fixed Fixed or Floating Istisna Short to medium term financing, for project financing (Aircraft, Infrastructure) Fixed Sukuk Capital market instrument similar to a conventional bond with a good secondary market potential. Fixed or Floating Sources: Market Securities Structured Solutions, Societe Generale, JP Morgan 6
SHARIAH SOLUTIONS The Solutions shall be endorsed by the Islamic Supervisory Board of the Issuer. MSD does not offer or provide Islamic financial services. 7
SHARIA SOLUTIONS* Packages Shariah Certificates Islamic Product Vehicles Assets Equities & Indices FI & Credit Commodities Mutual Funds Foreign Exchange Products can be adaptable to local currencies Short to Long term investment horizons Regular Income or payment at maturity only Can have full or partial capital protection Almost the same universe of underlying assets as for conventional structures Sources: Market Securities Structured Solutions, Societe Generale, JP Morgan * The Solutions shall be endorsed by the Islamic Supervisory Board of the Issuer. MSD does not offer or provide Islamic financial services. 8
SHARIAH CERTIFICATES(LIGHT) The Fatwas are issued by the Islamic Supervisory Board of the Issuer. MSD does not offer or provide Islamic financial services. 9
TRADE PROCESS AT INCEPTION SHARIA HEDGING Series of Murabaha Transactions backed by Commodity Market Counterparty 4 Hedging 3 2 Agent Issuer Structurer & Arranger 1 Investor Wa d unilateral and exclusive promises to enter into a future Commodity Murabaha Transactions FATWA* ON THE PROGRAMME LEVEL Sources: Market Securities Structured Solutions, Societe Generale, JP Morgan * The Fatwas are issued by the Islamic Supervisory Board of the Issuer. MSD does not offer or provide Islamic financial services. 10
TRADE PROCESS 1: Client delivers 100% cash versus Shariah Certificates (Light Sharia) via Euroclear on the Delivery Versus Payment Basis (DVP). This means that there is no settlement risk. 2: Structurer/Arranger executes the transaction by delivering cash versus Shariah Certificates to the Issuer via Euroclear on the Delivery Versus Payment Basis (DVP). This means that there is no settlement risk. 3: Issuer delivers cash to a hedging agent whilst issuing Shariah Certificates under European Medium Term Note program. 4: Hedging Agent executes a transaction in the market via Wa d and books all interim payments as Commodity Murabaha. 11
ISLAMIC PRODUCT VEHICLE (COMPREHENSIVE) 12
ISLAMIC PRODUCT VEHICLE* Flexible Sharia compliant issuance platform White labelled, cost efficient Issuance of Trust Certificates eligible for Sukuk classification Risk Profile - Partially or fully independent from Issuer s credit risk - Sharia compliant underlying assets - Agreements with various market counterparties Return Profile - Wide Range of payoffs - Tailor made maturities - Islamic finance expertise Sources: Market Securities Structured Solutions, Societe Generale, JP Morgan * The Islamic Vehicles shall be created and be endorsed by the Islamic Supervisory Board of the Issuer. MSD does not offer or provide Islamic financial services. 13
ISLAMIC PRODUCT VEHICLE* EACH CELL IS SECURED BY A SPECIFIC TRUST ASSET CELL A Investor Hedging Agent A CELL A Hedging Agent B CELL B CELL B Investor Hedging Agent C CELL C CELL C Investor Sources: Market Securities Structured Solutions, Societe Generale, JP Morgan * The Islamic Vehicles shall be created and be endorsed by the Islamic Supervisory Board of the Issuer. MSD does not offer or provide Islamic financial services. 14
HEDGING COUNTERPARTY INVESTOR ISLAMIC PRODUCT VEHICLE* Commodity Murabaha 1 (cost price) Cost Price + Profit 1 CELL A Issue Price Profit 1 Commodity Murabaha 2 (cost price) Cost Price + Profit 2 Underlying Wa d + Commodity Murabaha Transactions Series of Certificates Profit 2 Final Commodity Murabaha n Cost Price + Profit n Final Redemption Amount + Profit n Sources: Market Securities Structured Solutions, Societe Generale, JP Morgan * The Islamic Vehicles shall be created and be endorsed by the Islamic Supervisory Board of the Issuer. MSD does not offer or provide Islamic financial services. 15
ABOUT US Market Securities Structured Solutions is part of Market Securities Dubai Ltd, a DIFC based entity which is authorised and regulated by DFSA. Market Securities Dubai Ltd was established in 2013 and is regulated by the DFSA and authorised to deal, advise and arrange investments. Market Securities has offices in London, New-York, Paris, Geneva and Dubai. Danny Skutelis Danny Skutelis has started his professional career at Goldman Sachs in London in a Fixed Income Currency and Commodities department on a Macro Issuance Desk, responsible for new index and tracker funds. Goldman Sachs was followed by UBS in London where Danny has started in Alternative Investment Strategies and moved into sales to Russia/CIS. After almost 4 years with UBS, Danny was asked to join one of the biggest Inter-Dealer Brokers in the world Tradition in order to set up a Russia/ CIS desk for a hybrid-engineering subsidiary of the company called TFS Structured Products. After a rapid expansion in Russia, Danny has driven the company into GCC by setting up a desk in Dubai office of Tradition. As of November 2015, Danny has established a Structured Solutions Desk at Market Securities Dubai a hybrid-engineering boutique. Pulkit Sangal Pulkit Sangal is an Associate within the Structured Solutions team at Market Securities Structured Solutions (part of Market Securities Dubai Ltd) covering Institutions across the Middle East. He began his career at Commerzbank AG in Dubai as a member of the Equity Markets & Commodities division representing the Private Banks Sales team in the GCC for 2 years. In his role at Commerzbank, Pulkit was responsible for providing tailored Cross Asset Investment Solutions to regional institutions. Pulkit has resided in the Middle East for over 20 years; his qualifications include the Chartered Alternative Investments Analyst (CAIA) designation and an undergraduate degree in Economics from the Symbiosis School of Economics in Pune, India. 16
DISCLAIMER This material was produced by Market Securities (Dubai) Limited ( MSD ), a company regulated by the Dubai Financial Services Authority ( DFSA ) (firm reference number: F002425), registered in the Dubai International Financial Centre with the company number of CL1474 and the registered address of Unit N2004, Level 20, Emirates Financial Towers, Dubai International Financial Centre, Dubai, 506859, United Arab Emirates. MSD is authorised by the DFSA to provide services to Professional Clients and Market Counterparties only as defined in the DFSA Conduct of Business Rulebook. Therefore, this presentation is intended only for Professional Clients and no other Person should act upon it. Market commentary is not subject to any prohibition on dealing ahead of its dissemination to clients. The author of this communication may have discussed the information contained herein with others within MSD, and such other MSD personnel, associates or members may have already acted on the basis of this information (including by trading and communicating the information contained herein to other clients). MSD, MSD s personnel, associates or members (including those with whom the author may have consulted in the preparation of this communication), and other clients may be long or short the financial instruments referred to, may have acquired such positions at prices and market conditions that are no longer available, and may have interests different or adverse to your interests. This material is directed exclusively at market professionals and institutional investors and is not for distribution to retail clients, as defined by the rules of the Dubai Financial Services Authority. Any investment services to which the material may relate will not be made available to such retail clients. All of the views in this material about matters that include, without limitation, securities and companies, reflect the personal views of MSD staff. No part of these staff member s compensation was, is, or will be directly or indirectly related to material contained herein. The material in this report is for the general information of prospects and clients of MSD only. It does not take into account the particular investment objectives, financial situation or needs of individual prospects and/or clients. Any prices provided herein (other than those that are identified as historical) are indicative only and do not represent firm quotes as to either price or size. This material should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. 17
DISCLAIMER The information contained in this communication is based on generally available information and, while it is based on material that MSD consider reliable, MSD may not have verified the contents hereof. Opinions expressed are MSD staff members current opinions as of the date appearing on this material only. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. Past performance is no guide to future performance. The information and opinions contained herein are subject to change without notice. Unless otherwise stated, share prices are as at the close of business on the date of the research note. Neither the whole nor any part of this material may be duplicated in any form or by any means. Neither should any of this material be redistributed or disclosed to anyone without the prior consent of MSD. MSD, its directors, officers, employees and associates accept no liability whatsoever for any direct, indirect, incidental or consequential loss or damage of any kind arising out of the use of all or any of this material, provided that this exclusion of liability shall not exclude or limit any liability under any applicable law or regulation that may not be excluded or restricted. The services, securities and investments discussed in this material may not be available to, nor suitable for all investors. Investors should make their own investment decisions based upon their own financial objectives and financial resources and it should be noted that investment involves risk, including the risk of capital loss. In relation to securities denominated in foreign currency, movements in exchange rates will have an effect on the value, either favourable or unfavourable. MARKET SECURITIES (Dubai) Limited Emirates Financial Towers North 2004, DIFC, Dubai, P.O.Box: 506859, United Arab Emirates T: +971 4 374 1335 T: +971 4 374 1300 18