Kuwait's market watchdog has hired HSBC to advise on an initial public offering (IPO) of the Kuwait Stock Exchange.
The move paves the way for the second publicly listed exchange in the Gulf region after the Dubai Financial Market.
Kuwait's bourse has a market capitalisation of US$100 billion (Dh367.3bn), with 215 local and foreign firms listed.
"This will make Kuwait one of the first countries in the region to privatise its exchange and we are confident that the privatisation will be of great benefit to the Kuwaiti economy, investors and the listed companies," said Abdullah Al Gabandi, the head of the exchange privatisation committee at the Capital Markets Authority.
Under the Capital Markets Authority Law, passed almost two years ago, 50 per cent of the Kuwait Stock Exchange Company must be floated in an IPO for Kuwaiti citizens, with the rest sold to companies listed on the bourse.
The law also mandated the launch of an independent regulator with the aim of encouraging transparency.
The market authority's agreement with HSBC to advise on the offering lasts for six months. The regulator did not specify when the IPO would be launched.
Despite the newly established regulator, analysts say Kuwait's stock market is rife with insider trading, plagued by dubious schemes to entice investors and driven by unsubstantiated rumours that often make it into local newspapers.
"The move will improve trading rules and regulations, checks and balances, and reduce conflict of interest," said Haissam Arabi, the chief executive at the Dubai asset-manager Gulfmena Investments.
Saleem Khokhar, the head of equities at the National Bank of Abu Dhabi, said he hoped the Kuwait exchange would raise the standards of disclosure and investor relations among domestic companies.
Fifty Kuwaiti companies were suspended from trading last November after they failed to report third-quarter results on time.
Twenty-two of the listed companies had already been suspended for not declaring results from previous quarters.
Kuwait's stock market is the second most liquid exchange after Saudi Arabia and traded $114.7 million yesterday.
Last year the daily average was $72m. Saudi Arabia's Tadawul traded $1.3bn yesterday.