There is a thriving but lesser-known trading of company shares far removed from the established bourses in the UAE.
Thriving market in lesser-known shares
When it comes to trading shares in the over-the-counter market here, it pays to page "Dr Chanta".
Almost every day in the UAE, millions of dirhams change hands as company shares are bought and sold in transactions far removed from the established bourses.
These trades, a throwback to the days before stock exchanges in the region, are handled through word of mouth by a small group of brokers who manage the transactions.
Not so long ago, these brokers were jokingly referred to as "Dr Chanta", loosely translated to English as "Dr Briefcase", because they carried the valuable documents needed to process the trades.
"You have to ask and ask and ask," says Ihab al Faqih, who has been trading over-the-counter shares for Ghantoot Group clients for more than a decade. "You usually need to speak to one source to find out what the price of the share is, which can take up to a week."
The over-the-counter market accounts for transactions valued at an average of Dh40 million (US$10.8m) each month, says Mohammed Ali Yasin, the chief investment officer at CAPM Investments in Abu Dhabi.
That is a minuscule amount compared with the average traded value on the public exchanges - about Dh360m alone on the NASDAQ Dubai each month. Even so, it is still a matter of importance to the UAE's investment community.
Several major local companies are still traded outside the market, including Manazel Real Estate, AlQudra Holding, Noor Capital, The National Investor, RAK Petroleum and RAK Airways. The hypermarket chain Abu Dhabi Co-operative Society is arguably the most prominent company traded over the counter.
"The co-op is a solid company and probably the most popular traded stock outside the market," says Mohamed Hamdy, the general manager of Tadawul Shares and Bonds in Abu Dhabi.
"People like it because it is considered an Islamic stock and they provide unique access to the retail food industry."
Many companies prefer to stay outside the market because they believe their valuations are much higher than what the bourses would offer, or because their shareholders want to keep control.
These companies are classified as private joint stock companies, which allows them to sell shares to individuals without going public.
"A firm's transformation to a private joint stock company usually begins with a project that requires intensive capital," Mr al Faqih says.
"Founding shareholders are invited to be part of the project. Those who are targeted are usually powerful and have the money, where ideas are relayed.
"Once they are on board and people see those names associated with the project, then the smaller investors follow suit and become part of the story."
Owners of the shares can benefit through dividends or perhaps share appreciation, especially if the company decides to go public.
But it is not always easy to be part of the club. The brokers specialising in these sorts of deals maintain a network of clients who can match buyers and sellers.
"Its definitely a challenge, getting the quantities needed and finding the right people," says Mr al Faqih. "It's all through word of mouth."
In many ways, it is no different than the way "angel investors" in the US fund start-ups, or how venture capitalists allow shareholders to sell out their holdings.
This happened with the internet sensation Facebook, which is still private but recently executed a five-for-one stock split to compensate for its soaring value on the secondary market.
Because of the relative risks with private joint stock companies and their limited amount of capital, many companies provide their investors with audited financial statements on a quarterly basis.
These include details of investments abroad. Companies also hold meetings for shareholders to discuss the direction and performance of the company.
Before the establishment of local stock exchanges, shares of private joint stock companies were regulated by the Central Bank, which licensed brokerages to trade shares.
Most brokerages that were licensed after the introduction of the Emirates Securities and Commodities Authority (SCA) in 2000 do not trade over-the-counter because the regulations are not clear.
When market volumes dropped this year, there was talk of installing an electronic screen for over-the-counter shares so brokers could see real-time quotes, volumes and averages, says Mr Yasin.
The screen would bring greater transparency to those trades and allow for more frequent trading.
The proposal was given to the SCA but it is not clear if or when it will be brought in. The SCA was unavailable for comment.