UAE's two largest stock exchanges, ADX and DFM, discuss merger

The Dubai Financial Market and the Abu Dhabi Securities Exchange could consolidate, DFM chief executive says.

DUBAI // The country's two largest stock exchanges have discussed merging, says the chief executive of the Dubai Financial Market (DFM). In addition to pursuing a merger with the Abu Dhabi Securities Exchange (ADX), the DFM is also pressing ahead with the consolidation of the two Dubai stock exchanges. It expects to conclude the deal to acquire NASDAQ Dubai within two weeks, Essa Kazim said yesterday.

"It is in the interest of everybody to consolidate. There have been discussions at the top level, meaning the owners of the exchanges," he said on the sidelines of a conference. The Abu Dhabi Government owns the ADX, while the DFM is 80 per cent controlled by Borse Dubai, which is also the holding company of NASDAQ Dubai. "This is one of the industries where you always gain from merger, as consolidation lowers your marginal cost. It's an engine that is running, and if you populate it with more listings, the marginal cost of extra listings will go down," Mr Kazim said.

Officials of the ADX declined to comment. The two Dubai exchanges are already moving towards a single trading platform and synchronised trading hours. In December, Borse Dubai, the majority owner of the DFM and NASDAQ Dubai, agreed to buy NASDAQ OMX's remaining stake in NASDAQ Dubai in a deal valued at Dh445.1 million (US$121.1m). "There is a process we have to follow," he said, adding that the NASDAQ Dubai deal was in its "very final stages".

The merger of the two Dubai bourses would require regulatory approval from the Emirates Securities and Commodities Authority, which regulates the DFM, and the Dubai Financial Services Authority, which oversees the Dubai International Financial Centre and NASDAQ Dubai. "The same technology will be supporting both markets. It will have two different regulators, but one trading platform," he explained.

With the completion of the deal, the companies listed on the NASDAQ Dubai will have the choice of trading either in dirhams or US dollars, instead of only in dollars. Exchanges in the UAE have struggled to maintain profitability as the income from trades has fallen sharply with declining equity values. The DFM's profits fell by almost half last year.