DFM set to regulate local exchange-traded funds

Essa Kazim, the chairman of the Dubai Financial Market, the new ETF platform underscores the exchange's drive to further diversify its product offering. Pawan Singh / The National

The Dubai Financial Market (DFM) has given the green light to a platform enabling the trading of locally domiciled exchange-traded funds (ETFs).

ETFs are similar to mutual funds, in that they track an asset or series of assets including stocks, commodities and bonds, but differ in that they are listed on stock exchanges and charge minimal fees.

Their popularity has grown significantly around the world in recent years as a cost-efficient alternative to mutual funds, with assets in global ETFs passing US$3 trillion last year.

The DFM formally launched the new ETF platform at a ceremony on Sunday morning at the exchange, after finalising regulations for the marketing and trading of the securities.

“Over the past few months, the market has approved a new set of regulations developed in collaboration with traders to serve as a foundation for its new ETF platform,” said Essa Kazim, the chairman of the DFM.

“This … underscores our drive to further diversify our product offering for both local and global investors.”

Under the new regulations, trading in ETFs on the DFM is confined to market makers, authorised participants and liquidity providers.

Following the release of the new rules the first domestic ETF to begin trading was a fund run by Abu Dhabi-based Afkar Capital.

Afkar launched the fund in June last year, although trading only started on Sunday. It provides access to 10 of the UAE’s largest stocks, spread across the DFM, Nasdaq Dubai and Abu Dhabi Securities Exchange. Etisalat, Emaar Properties, Dubai Islamic Bank and ADCB account for 50 per cent of the fund’s weighting.

In on Sunday’s trading, the Afkar fund rose in value by 7 per cent to Dh3.70, with 20,000 units traded.

Afkar has appointed Al Ramz Capital as a new authorised participant for the ETF and the appointment of Egypt’s Beltone Financial as a foreign liquidity provider. It had previously appointed EFG Hermes Brokerage, Al Safwa Mubasher Financial Services and NBAD Securities as authorised participants for the ETF.

Regulations for the trading of ETFs were first approved by the UAE’s Securities and Commodities Authority in 2009 but were little used given the depressed state of UAE stocks at the time.

NBAD launched the Arabian Gulf's first ETF, the NBAD Oneshare Dow Jones UAE 25-ETF, in March 2010. However, the ETF, listed on the Abu Dhabi stock exchange, has suffered from poor liquidity for the past five years.

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