Interpreting Middle East Economic News and Analyzing Market Trends

NASDAQ Dubai looks to focus on sukuk and bond trading as equity trading never materialized

 

Launched in 2005 as the Dubai International Financial Exchange (DIFX) and rebranded in 2008, NASDAQ Dubai has struggled to get equity listings.  Of the seven equities listed today only one, DP World, trades with any significant volume.

 

Where the exhcange seems to have found a niche is in sukuk and bond trading. The exchange currently lists 12 sukuk issues and 5 bond issues.  Sukuk, of course, have gained a lot of attention lately and NASDAQ Dubai is aiming to capitalize on this.

 

NASDAQ Dubai, is preparing to open a platform on which investors can trade Sukuk (Islamic bonds) and conventional bonds.

Trades will be automatically and exclusively routed for settlement at Euroclear Bank. The tradable securities will initially comprise at least 12 Sukuk and bonds that are listed on the exchange, with a nominal value of 10.9 billion dollars.

The platform will be available to institutional and high-net worth investors and will be opened and gradually developed in coming weeks.

Essa Kazim, Chairman of Borse Dubai, the holding company for Dubai’s stock exchanges, said: “The new platform is a natural extension of Dubai’s existing role as a centre for Sukuk and bond issuance and listing. NASDAQ Dubai will offer an efficient trading venue to participants from the region and around the world, providing fresh impetus to the growth of the capital markets in the UAE and the region.”

The platform will open with links to leading UAE and international financial services institutions, creating a first class trading and settlement infrastructure.

For the first time, prices of NASDAQ Dubai-listed Sukuk and bonds will be visible to all investors simultaneously on the same screen-based system, through the exchange. This will increase transparency and efficiency in the secondary market as well as promoting liquidity.

Currently the Sukuk and bonds are tradable through banks offering investors different trading structures and different prices (known as ‘over the counter’ trading).

The NASDAQ Dubai platform will expand investor choice and aims to bring new participants into the market. A number of NASDAQ Dubai Members have already signed up to the new platform in order to offer Sukuk and bond trading to their clients and other Members are preparing to do so.

Read the full story from FX-MM.

 

Several exchanges have sprouted up in Dubai over the past decade, including NASDAQ Dubai, such as; the Dubai Mercantile Exchange (DME), the Dubai Gold and Commodities Exchange (DGCX), and the Dubai Multi-Commodities Centre (DMCC).  However, the most active exchange remains the Dubai Financial Market (DFM), which is the main stock exchange in Dubai.  The newer exchanges have all struggled to build trading volume and have since resorted to becoming niche players within their respective sectors.

  

The DME, for example, has focused on a specific oil futures contract, the DGCX has focused on a smaller size gold futures contract, while the DMCC has looked to tea, diamonds and pearl trading.  Taking away trading from the big exchanges around the globe has proven to be more challenging than expected.  Focusing on sukuk trading is a good move for NASDAQ Dubai.