Oman's regulator, Capital Market Authority, is encouraging consolidation of brokerages in the small non-Opec producer and expects at least three to four initial public offerings next year, its executive president said.

'At CMA we are seriously considering possible steps like encouraging the merging of the brokerage companies, addressing the issue of reducing trade commissions and observing and insisting (companies) follow a strict corporate governance code,' CMA's Yahya al-Jabri told Reuters in a written response to questions.

The Omani market has more than 20 brokerages, some of which are divisions of banks such as Bank Muscat , National Bank of Oman, or Bank Dhofar.

Like most other markets in the Gulf, slumping volumes and a sharp drop in market valuations have hampered the local capital markets.

The bourse may see at least three to four IPOs in 2012, with one company expected to float in a couple of months, Jabri said.

Middle East IPO value plunged 95 per cent to its lowest level in five years during the first quarter, Ernst & Young said in a May report.

Jabri also said there was a need for new regulations for the sukuk market.

Oman is the only Gulf state which until now has not set up a bank specifically offering products and services complying with Islamic law.

'The CMA is in the process of coming with new rules and regulations for this market, taking all issues into consideration and more specifically risk factors to make the issuance risk free and attractive to the investment community,' he said.

'The liquidity in the market brings sovereigns to the sukuk market. There is a need for it.'

The sultanate's central bank granted the first Islamic bank licence to lender Bank Nizwa in May, following Oman's decision to embrace Islamic finance as a way to keep sharia-compliant investment funds within its borders.

'Beyond doubt, the sukuk (Islamic bonds) plays a significant positive role in the development of the market.'-Reuters