ADX unveils new 'future proof' market model to attract wider pool of investors

CEO Abdulla Alnuaimi says the model increased connectivity by 400 per cent and new post-trade capabilities

The other is the inauguration and signing ceremony of ADX's new market model "New ADX Group" in Abu Dhabi. Photo: ADX

Abu Dhabi Exchange (ADX) launched a new market infrastructure that introduces more diverse product offerings to attract retail investors as the emirate seeks to boost its capital markets.

The "New ADX Group" business model and its two subsidiaries announced on Monday the introduction of new post-trade capabilities and services to allow clearing and settlement platforms to operate at a faster rate, encouraging a wider group of investors to participate.

The post-trade divisions performing these functions under the model are Abu Dhabi Clear (AD Clear) and Abu Dhabi Depository (AD CSD), aimed at boosting market efficiency to facilitate a greater inflow of capital. The core platform powering these trading engines that uses technology developed by New York's online stock exchange Nasdaq, ADX's chief executive said, went into effect on January 20 and has already delivered on its promise.

"In terms of connectivity ... it's increased by more than 400 per cent," Abdulla Al Nuaimi told The National in an interview at the model's launch event in Abu Dhabi. "This gives new capabilities for our shareholders, for our investors."

The engine is especially important for algorithmic and high-frequency trading, he added.

How it works

The two subsidiaries integrate several asset classes such as equities, exchange traded funds (ETFs), derivatives and debt instruments on to a single platform. Algorithms for high-frequency trading (HFT) will be updated for greater optimisation in addition to the introduction of new and more sophisticated order types for greater trading flexibility.

The goal of the new infrastructure is to deepen the reach of the already global ADX platform by creating a trading system with greater accessibility and ease of use. By providing quicker and more meaningful information, ADX is widening its appeal to not only institutional investors, but individual retail investors as well, said Mr Al Nuaimi.

Last week, social trading and investing platform eToro added more than 30 companies listed on ADX to its platform after an agreement last year. The broker platform has 38 million registered users from 75 countries, its website says.

Such partnerships are part of ADX's continuing effort to enhance market accessibility and widen participation in Abu Dhabi's capital market, Mr Al Nuaimi said at the time.

The new trading system aims to unlock more investment opportunities and deepen market liquidity by providing investors and industry participants with greater and faster access to market activities and growth sectors in Abu Dhabi, ADX said in a statement.

Capital inflows

ADX, with a market capitalisation of about $779 billion as of Monday, is the second largest exchange in the Arab World after Saudi Arabia's Tadawul. It ranked as the seventh largest globally for emerging market exchanges last year.

It has recorded a surge in initial public offerings in recent years driven by robust investor demand for new issues as well as economic growth in the UAE. Its latest is UAE technology company Alpha Data, which is the exchange's first IPO of the year and aims to raise up to Dh600 million ($163.4 million) by closing on Tuesday in a sign of strong demand for the listing.

Mr Al Nuaimi said 2025 would yield more offerings, with "quite a good number" of IPOs expected this year.

The bourse accounted for 27 per cent of IPO proceeds from the Middle East in 2024. In the past five years, ADX has outperformed the MSCI Emerging markets Index with its general index increasing 86 per cent over that period of time, according to the exchange.

Total trading value last year reached Dh342 billion, a 7 per cent annual increase, while net foreign investment rose to Dh24 billion, the ADX said this month. Foreign investors accounted for nearly 40 per cent of total trading activity, while institutional investors contributed to 80 per cent of the total trade value, the exchange said.

Future capitalisation

Mr Al Nuaimi emphasised that while many focus on the market capitalisation of exchanges to determine their worth, it is their product offerings that demonstrate the value of their capabilities.

"We focus more on the diversification of the exchange," he said. "If you look at ADX over the last two years, we have the [most] active ETF market in the region, we have the [most] active derivatives market in the region."

Mr Al Nuaimi said these markets are gaining momentum, particularly as ADX is constantly exploring ways to improve its ability to disseminate data, which is critical to investors and algorithm traders.

He said: "I see ourselves in the top 10 [globally] with speed," which is already improving across all the exchange's back-end functions.

The ADX chief executive believes generative AI and large language models (LLMs) are further accelerating investor access to information, and once matured will attract a greater number of investors.

"You will not need to read a report of 40 pages. It [generative AI] gives you that snapshot chart," that will allow a wider pool of investors to have trading access and participate, he said.

The next step, he said, is the potential to allow investors to learn from previous trading transactions and more easily develop future strategies. "Now with AI, you will be able to analyse and give yourself more opportunity," said Mr Al Nuaimi.