Dubai Financial Market (DFM), the emirate’s principal stock exchange, has proposed a series of changes to the equities operation of Nasdaq Dubai, the exchange it acquired at the end of 2009.
The changes, which are subject to regulatory approval and are planned to take effect within the next few months, are aimed at attracting more liquidity from the retail investors who trade on DFM, the exchange said.
Under the proposals, the operational functions of Nasdaq Dubai’s equities division, comprising trading, clearing, settlement and custody, will effectively be outsourced to DFM. However, Nasdaq Dubai will continue as a separate exchange, will still be regulated by the Dubai Financial Services Authority – the integral regulator of the Dubai International Financial Centre – rather than the Emirates Securities and Commodities Authority, which oversees DFM.
Nasdaq Dubai’s derivatives, debt securities and structured products markets will not be affected by the changes.
Equities order matching will be transferred to DFM’s X-Stream trading platform from Nasdaq Dubai’s own version of the same system. As such, the existing trading features of Nasdaq Dubai’s trading system will cease and be replaced with DFM functionality.
The switchover will reduce Nasdaq Dubai’s current list of order types to four – market, limit, fill or kill and fill and kill. Stop, iceberg and minimum-quantity orders will no longer be accepted.
Trading hours will be reduced to 10.00 -14.00 local time (06.00-10.00 GMT) from 10.00-17.00. Nasdaq Dubai’s closing auction will also be abolished.
Sell orders will need to be pre-validated – before a sell order can be executed, the seller must have shares in the DFM central securities depository or there must be an outstanding purchase position. Buy orders and executions will be limited to a clearing member’s bank guarantee.
A maximum fluctuation of +15% or -10% of a stock price from the previous days closing price will be allowed.
Also, trading members executing on behalf of clients who use different custodians will no longer be able to aggregate those clients’ orders.
Nasdaq Dubai’s clearing and settlement cycle will be changed to T+2 from T+3 and the clearing and settlement model will be changed to a net financial settlement and gross securities settlement system.