An overhaul of Nasdaq Dubai’s trading practices initiated by global exchange group Nasdaq OMX last November has played a major part in growing trading volumes, according to Jeff Singer, CEO of the UAE-based trading venue.
Singer says that both retail and institutional investors have responded positively to the recent changes. “We have spent time reviewing all the trading rules and taking advice on pricing structures and tick sizes from the experience we have elsewhere in the world,” Singer told theTRADEnews.com. “From Nasdaq OMX’s point of view, this was an active investment that has opened doors across the region to different types of investors.”
Nasdaq OMX took a one third stake in the exchange, previously known as the Dubai International Financial Exchange, in February 2008, then rebranded it as Nasdaq Dubai last November. Nasdaq Dubai is two-thirds owned by Borse Dubai, a government-owned holding company that also holds a stake in the Dubai Financial Market. Last week, the fruits of Nasdaq Dubai’s investment were revealed with a steep increase in trading activity in the first full-quarter figures since the rebrand.
Equities trading volumes increased to 1.04 billion in the first quarter of 2009, a rise of 62% from the first quarter of 2008 (640 million) and an increase of 27% over Q4 2008 (817 million). Derivatives trading has also surged since it was introduced in November last year, with 6,816 equity futures contracts traded in March, up from 386 in February and 90 in January. The exchange plans to expand its derivatives market further by listing options on equity indices and individual equities. Trading on Sundays has also proved popular since its launch towards the end of last year. Sunday equity trading volumes reached 15.1 million in March, a 308% rise from 3.7 million February.
Singer says the exchange had to respond to “a significant drop” in market activity between June to August last year as institutions began to exit the market, but says its retail and OTC offerings have Nasdaq Dubai “an attractive place to invest in again”.
In particular, institutional investors have responded to the development of over-the-counter (OTC) trading activity in the country. Dubai is one of few UAE countries to permit OTC trading and all OTC trades in stocks listed on Nasdaq Dubai must be reported to the exchange. The reporting of OTC trades is something Singer was keen to push through following his arrival to Nasdaq Dubai in June, as it allows greater transparency and brings the governance of OTC markets in Dubai closer to other major financial centers.
“We are different to local markets in the fact that we have OTC markets, which helps us to facilitate the trading of institutional blocks of stock,” said Singer. “Since we have introduced the reporting element, volumes have almost doubled on Nasdaq Dubai.”