The Abu Dhabi Securities Exchange said on Tuesday it was introducing technical short-selling in an effort to increase liquidity in the stock market and attract more foreign investors.

In short-selling, investors sell stocks they do not own to profit if prices have dropped when the trades are settled. In the exchange’s technical short-selling system, trades are settled within two business days, with short-sellers depositing an initial margin worth 50 per cent of the shares’ market value.

Several rules seek to reduce volatility and risk in the system, such as a trading suspension if a stock drops 5 percent, or if the proportion of a company’s capital sold short reaches 10 percent.

The neighbouring Dubai Financial Market said in January that it planned to introduce short-selling.