Brokers at smaller firms in the UAE are bracing themselves for possible redundancy as last week’s stock market slump left some either facing bankruptcy or the prospect of being swallowed up by larger rivals.

The Securities and Commodities Authority (SCA) underlined the severity of last week’s stock market slide, saying that brokerages were required to execute massive selling at losses, which could have been too much for smaller firms.

Abdullah Al Torreifi, chief executive officer of the SCA, said: “The market meltdown has clearly demonstrated the need to focus on the condition of the brokerage firm, its commitment to transparency and professionalism, and more importantly the need for more efficiency in the services through mergers and acquisitions in the brokerage community.”

The number of brokerages in the UAE has swelled from 17 in 2001 to over 100 now. During the last major downturn in 1997, a number of smaller firms were forced to shut up shop.

Many seemingly small brokerages are in fact the securities arms of larger institutions, such as Abu Dhabi Brokers (subsidiary of Abu-Dhabi Commercial Bank), Al Islami Financial Services (part of Dubai Islamic Bank) or Mashreq Securities (part of Mashreq Bank). Other independent brokerages listed in the UAE include Daman Securities and MacSharaf Securities.

In late September, the brokerage arm of Dubai-based General Investment Company merged with German group Baader Bank to form Gulf Baader Capital Market. A report by the Khaleej Times reckons a total of three mergers are already under way within the UAE.

“The issue is whether some can maintain costs of operation versus deteriorating revenues from shallow volumes. There will be consolidation if volumes deteriorate,” said Khaled Kurdieh, chief executive of Mashreq Securities.