Annual Review 2010 Print

Business Review


In a year when equities traded value on all other GCC stock exchanges declined, in some cases by more than 50%, NASDAQ Dubai bucked the trend by posting an increase of 22% over 2009. The exchange also made key structural changes to its market during 2010 that are designed to further increase liquidity, through an outsourcing of its key operational functions to Dubai Financial Market (DFM). This radical step has redrawn the capital markets landscape in the region by bringing NASDAQ Dubai’s international institutional investors together into the same liquidity pool as DFM’s more than 500,000 regional retail investors. For the first time, issuers can now take advantage of an exchange in their own region that is easily accessible by all types of investor as well as regulated to international standards.

As 2010 drew to a close, the outsourcing was already bearing fruit. Eight UAE brokers joined NASDAQ Dubai’s market over the year, attracted by the prospects of more listings and increased trading. The exchange is also in talks with a number of substantial issuers that are interested in carrying out an IPO at an appropriate time.

NASDAQ Dubai was strengthened by the appointment in June of a new Board of Directors, led by Abdul Wahed Al Fahim as Chairman. The Board’s leadership and experience have played a key role in the exchange’s progress.


Trading

The share price of NASDAQ Dubai’s two most heavily traded companies, DP World and Depa, rose by 47% and 32% respectively in price during 2010, putting both companies in the top five gainers of all UAE stocks over the year. Equities traded value on the exchange rose 22% to $1.31 billion, up from $1.07 billion in 2009. All other GCC exchanges by contrast recorded decreases in traded value. NASDAQ Dubai’s traded volume declined 15% over the year to 2.62 billion, from 3.1 billion in 2009. This however was a much smaller decrease than that of most other regional exchanges and was a very satisfactory performance in a period of continued global economic uncertainty.

Equity derivatives trading on the exchange reached $1.6 million during the year. As markets in underlying shares recover, NASDAQ Dubai believes there is enormous potential for growth in its equity derivatives market in coming years. Trading in Dubai Gold Securities over the year reached $1.18 million and structured products trading was valued at $237,000.


Outsourcing to DFM

DFM acquired two thirds of the shares in NASDAQ Dubai in May. The acquisition, which had been announced in 2009, was an important step forward in plans to consolidate the two exchanges. It was followed in July by the outsourcing by NASDAQ Dubai of its trading, clearing, settlement and custody functions for equities to DFM’s systems, following many months of careful preparation and consultation with market participants. This landmark achievement has merged the liquidity pools of the two exchanges, bringing NASDAQ Dubai’s institutional investors together on to the same trading platform as DFM’s more than 500,000 retail investors. The result is a trading venue that is unique in the region in its accessibility by diverse types of investor.

NASDAQ Dubai remains regulated by Dubai Financial Services Authority and has retained its own regulations and Membership, thus ensuring that its international standards are preserved.

A key aspect of the outsourcing is that investors can now buy and sell on both exchanges through the same Investor Number, which streamlines the trading process. They can receive updates of their trading activity from the exchanges in a unified monthly report. In addition, the data of both exchanges is now tailored to appear on the same page of brokers’ screens, and trading details of NASDAQ Dubai shares are displayed on DFM’s website alongside its own. NASDAQ Dubai has aligned its trading hours to those of DFM – 10am to 2pm, Monday-Thursday – and has reduced the fees it charges brokers for trading so they are similar to those of DFM, including reducing the minimum fee from $10 to $8. It has abolished its custody fee.

Following the outsourcing, the share of retail trading on NASDAQ Dubai has increased. This trend looks set to continue, creating a virtuous circle of retail and institutional liquidity growth that positions Dubai as the listing and trading hub of the region.


Members

Regional Members of NASDAQ Dubai increased their share of trading on the exchange in 2010 to 43%, up from 20% in 2009. This has created a more equal balance with international Members, consistent with the growth of the exchange as a trading venue serving both the international investors and those in its own region. Eight brokers joined NASDAQ Dubai during the year, bringing the total number of Members to 35. Of these, 22 are regionally based and 13 have their headquarters outside the region, including most of the world's large investment banks.

The new arrivals in 2010 were EFG-Hermes Brokerage; Arqaam Securities; Deutsche Securities & Services; SHUAA Securities; Al Dhabi Brokerage; Index Securities; NAEEM Shares & Bonds; and Abu Dhabi Financial Services. Nearly all the leading brokers on DFM, including seven of its top eight by 2010 trading volume, are now NASDAQ Dubai Members. As part of its progamme to raise awareness of its market, NASDAQ Dubai held a number of workshops for its brokers during 2010. These included a seminar explaining the details of the outsourcing to DFM that was attended by representatives of more than 50 UAE brokers.


Academy

Training courses delivered by NASDAQ Dubai Academy during the year included a two-day seminar on equity derivatives, given in association with the London-based company 7city Learning. The exchange also gave courses on compliance, money-laundering and market abuse, organized jointly with DFM and delivered in association with DIFC-based trainer Total Solutions. For the first time, the Academy gave a course in Kuwait, covering investor relations and corporate communications and arranged in conjunction with London-based company Finance Talking. The Academy is working increasingly closely with DFM and plans to give further courses on these and other topics in 2011 in both English and Arabic.




Jeff's Signature

Jeff Singer

Chief Executive Officer

Jeff Singer

Jeff Singer

Chief Executive Officer