Consolidation with DFM - Overview
New link with DFM will increase liquidity, strengthen Dubai’s role as capital markets hub
NASDAQ Dubai outsourced its trading, settlement, clearing and custody functions for equities to Dubai Financial Market’s (DFM’s) systems on 11 July, 2010. The outsourcing is part of a strategy to increase trading volumes on NASDAQ Dubai and strengthen Dubai’s role as a centre of capital markets activity.
NASDAQ Dubai worked closely with its market participants to meet a challenging timetable for the outsourcing. It brings DFM’s more than 550,000 individual investors together in one deep liquidity pool with NASDAQ Dubai’s international institutional investors.
DFM and NASDAQ Dubai equities are now displayed together on the DFM website. NASDAQ Dubai equities also continue to be displayed separately on the NASDAQ Dubai website.
The outsourcing was approved by Dubai Financial Services Authority (DFSA). NASDAQ Dubai continues to be regulated by DFSA, the financial services regulator inside the Dubai International Financial Centre (DIFC). NASDAQ Dubai remains a separate company and retains its own legal framework, Listing Rules and Members.
A spokesperson for DP World, the most heavily traded company listed on NASDAQ Dubai, said: “We are delighted that NASDAQ Dubai and DFM are taking active measures to increase regional investor access to trading shares listed on NASDAQ Dubai and improve liquidity. We look forward to working alongside Nasdaq Dubai to attract greater liquidity from the regional markets. We will work with NASDAQ Dubai to ensure fungibility with our planned dual listing."
A number of NASDAQ Dubai secondary share listings have full fungibilty with their listings on other international exchanges. These arrangements remain in place following the outsourcing. NASDAQ Dubai is ready to work with all its listed companies to put in place fungibility arrangements that would potentially generate and facilitate greater liquidity.
Under the outsourcing, NASDAQ Dubai’s equities remain listed on NASDAQ Dubai and are not be listed on DFM. Trading of equity derivatives continues to take place on NASDAQ Dubai’s own trading platform and systems.
Operational details
NASDAQ Dubai has made changes to its market model in order to facilitate the successful outsourcing of its trading, settlement, clearing and custody functions for equities to DFM systems. Some of these changes are reflected in amendments to NASDAQ Dubai’s Business Rules, which became effective on 11 July 2010, while others consist of revised operating procedures.
Trading times:
Opening hours are from 10am to 2pm UAE time (6am to 10am GMT) Sunday –Thursday. These are also DFM’s opening hours. Before the outsourcing, NASDAQ Dubai’s trading hours were 10am to 5pm UAE time (6am to 1pm GMT) Sunday -Thursday.
Trading fees:
NASDAQ Dubai has cut the fees it charges brokers for trading, including reducing the minimum fee from $10 to $8. It has abolished its custody fee.
Access by investors:
Institutional investors may continue to trade NASDAQ Dubai equities through NASDAQ Dubai brokers in exactly the same way as before the outsourcing, including through an omnibus account. They do not need to take any action to keep trading. However those who possess, or obtain, a DFM Investor Number (NIN) may use that NIN for trading the equities of both exchanges if they wish.
NASDAQ Dubai is encouraging individual investors who use UAE brokers to obtain a NIN, if they do not already have one. They may use the same NIN to trade on both exchanges.
Access by brokers:
NASDAQ Dubai Members may connect directly to the DFM X-Stream trading platform and many have chosen to do so. NASDAQ Dubai Members may also trade through NASDAQ Dubai’s Market Place Services function, or through another NASDAQ Dubai Member. Only NASDAQ Dubai Members may trade directly on NASDAQ Dubai.
Margining:
NASDAQ Dubai accepts bank guarantees as margining under the outsourcing. A Member may match buy trades up to the value of its settlement cap.
Pre-validation:
All sell orders must be prevalidated, such that the trading system ensures that the securities to be sold are held in the relevant trading or custody accounts.
Settlement cycle:
Trades have moved from a T+3 to a T+2 settlement cycle, which is the DFM settlement cycle. The trading and settlement cycle has been revised accordingly, including market holidays.
Settlement banks:
Emirates NBD became an approved Settlement Bank of NASDAQ Dubai for equities in June 2010, in time for the outsourcing. Standard Chartered and HSBC are also approved Settlement Banks.
Closing price:
This is the last traded price during a business day. If there is none, it will be the previous day’s closing price.
Trading safeguards:
The reference safeguard is 10% higher or 10% lower than the previous closing price, where the previous closing price is higher than or equal to $0.50.
Short selling: Covered short selling of NASDAQ Dubai equities continues to be permitted. The exchange has extended its short sale reporting requirement for another six months, to 1 January 2011.
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