Nasdaq Dubai is eyeing the introduction of futures products at Middle East equity markets after launching the trading of forward contracts linked to the Dubai Financial Market General Index and the Abu Dhabi Securities Exchange’s ADI gauge on its platform on Sunday.
“One of our basic strategies is to grow the derivatives market in Nasdaq Dubai and this growth will be achieved through new products or new regions,” Hamed Ali, chief executive of Nasdaq Dubai, told reporters at the launch of the futures index in Abu Dhabi. “We are eyeing other bourses outside the UAE to launch futures and indices or similar products.”
The bourse also has “a good pipeline” of listings that could come to the market if companies decide to go ahead with the initial public offerings, Mr Ali said. In 2016, Nasdaq Dubai launched single stock futures for a select group of equities traded in Dubai and Abu Dhabi as part of a broader strategy to diversify its offerings, increase liquidity and attract more institutional investors. The bourse, which started with seven single stock futures, now has 17.
UAE equity markets are improving their range of products to help increase liquidity impacted by the slump in oil prices, geopolitical uncertainty and slower economic growth. Last year, Dubai and Abu Dhabi launched regulated short-selling services in a limited form and for a select group of stocks as part of efforts to attract more liquidity.
The launch of futures linked to local gauges is a positive development for markets and investors in the long term, analysts said.
“All of these vehicles would be different ways to offer access to the underlying market which should enhance liquidity over the long-term, and that has been a challenge to the UAE market in particular, which has been witnessing relatively subdued levels of liquidity in the past year,” said Rami Sidani, the head of frontier investments at the asset manager Schroders.
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The launch of the futures linked to the DFM General Index and ADI will enable the trading of equity futures on Nasdaq’s derivatives platform, in turn increasing liquidity, attracting international investors and providing a framework for hedging, said Mr Ali.
“One of the roles that is played by derivatives is allowing investors to hedge during times of volatility,” he said. “Now that the products are available in the UAE ... they will increase the investors’ confidence in the market and give the investors a wider choice.”
Last year, Nasdaq Dubai signed a licence agreement with the index compiler MSCI to use its widely-tracked regional indexes to create derivative products traded on Nasdaq Dubai’s derivatives platform. The bourse expects to introduce such products this year.
“The third product we will launch in the coming weeks and months is based on the MSCI, which is a well-known product, so it will be very beautiful to have a future index based on this product in the market,” said Mr Ali.
The equity market is also looking at local and regional listings, including dual ones, he said.
The last equity listing on Nasdaq Dubai was ENBD Reit last year.
“We have a good pipeline and the talks are good. The decision when to float depends on each company,” Mr Ali said.
Nasdaq Dubai is also providing assistance to the Tunisian government should they decide to launch their first sukuk. Last year the bourse joined a Tunisian government task force to prepare the North African country for the sale.
“Tunisia is aspiring to launch its first sukuk and our role is to help with our expertise and work with the government of Tunisia if they want to issue or list their sukuk,” he said. “This [sukuk] expertise we want to export to new markets and one of these markets is Tunisia.”